In the wake of Friday’s referendum result to leave the EU, the British stock market is absolutely reeling, with the pound dropping in value beyond the initial 31-year low, and banks suspending stock sales due to spectaculaty one-day losses.
Billions of pounds have vanished overnight from British stocks, rendering bank stock trading dead in the water and prompting the Bank of England to speak out, guaranteeing an additional £250 billion in liquid assets to prop up the economy should the market collapse further. However, while the devastation reached far and hit hard, few have been wiped out as completely as ITV.
When results were announced on Friday, shares in ITV fell 20%, then a further 5% on Monday, for a total loss of £2.5 billion in stock value. At the time of writing, the individual share price of a piece of ITV stock is £1.65, down from the pre-Brexit price of £2.20, and the company is in freefall. This is largely due to the fact that ITV relies almost entirely upon advertisers for its largest revenue stream, and in the wake of Brexit, advertising sales have tailed off in short order.
Investors are describing the situation as “a nervous one” with the potential financial repercussions of the EU vote hanging over the heads of every investor, budget-maker and marketing executive. The end result of all this cautious waiting is a freeze in advertising money – money that ITV needs to survive. This is no new situation – Brexit jitters were leaving advertising sales “flat” as far back as May, but since the worst has come to pass for advertisers, the problem has reached catastrophic levels since Friday.
As a result, stocks continue to fall, and London analysts are starting to wonder whether the floundering television company is about to be scooped up by a larger, more powerful and less-affected company in the chaos – namely, Liberty Global, the owner of Virgin Media. Coupled with the declining value of the pound relative to other currencies, the situation is ripe for a foreign company like Liberty Global to strike and assimiliate ITV before the market stabilises.
Liberty Global is well-placed to make a move, as its CEO, John Malone, has shown his interest in taking over ITV before, and the company is currently the single largest ITV shareholder, with a share of 9.9% of the drowning TV company.
Malone and Liberty Global are also the largest shareholders on board for Discovery, and have in the past aggressively taken over European and British assets such as Eurosport, the exclusive TV rights to broadcast the London Olympics and All3Media, makers of Midsomer Murders and The Only Way Is Essex.
However, despite Liberty Global’s edge in folding ITV in to Virgin Media, they are not the only large overseas company with an interest.
Ian Whittaker, chief analyst at Liberum, announced to the Guardian this week that the fall of the pound and the collapsing share prices have “greatly increased the chances of a bid by the major US media juggernauts – but also from fast-growing new media/tech companies. As an example, we believe that a number of US internet companies thrw their hats into the ring for exclusive rights to broadcast the English Premier League on their streaming services in the last bidding round. There’s no reason to discount ITV from their possible acquisitions, as they are clearly looking to expand to traditional TV companies.”
One of the biggest possible contenders against Virgin Media is the seemingly unstoppable US giant Comcast, the owners of NBC, who in turn own Carnival, the popular studio behind Downton Abbey. With several other European assets under their belt, and no shortage of ambition, it could be that Comcast will direct NBC to attempt to take over ITV, since they have a foot in the door already with the Downton production studio and have oreviously expressed interest in taking over ITV itself, should the opportunity ever arise.
Returning to Ian Whittaker, both he and the other analysts at Liberum recommended that investors “take advantage of ITV’s share collapse” to jump in and buy the deflated shares. Slapping a “buy” recommendation on the TV company, they took into account their analysis of ITV’s past performance in recessions, such as the 8.3% drop in shares they survived in 2009 with the collapse of Lehman brothers and the complete global recession caused by the shockwaves, comparing it to the predicted 8.7% total fall next year.
Speaking to the press, Whittaker defended the decision to advise investors to buy, saying “the fundamentals remain the same in the aftermath of the Brexit vote. Even if we take into account an advertising slump the likes of which we haven’t seen since the fall of Lehman Brothers in 2009, shares in ITV would still look very cheap, with an excellent dividend yield. Even if we look at this situation as a completely cataclysmic, disastrous event, ITV still looks cheap and attractive from an investor’s point of view.”
As Liberty Global and Comcast possibly vanish to prepare their bids, other media stocks continue to fall across the board. Sky is down 3%, Trinity Mirror, owner of the Daily Mirror, is down 10%, and Daily Mail is down 4%.