Peter Kafka

Recent Posts by Peter Kafka

Time Warner’s New Strategy: Bigger Stock Price, Same Company

This is my understanding of Time Warner CEO Jeff Bewkes’s plan, circa early 2008: Dress up AOL for a sale, pocket several billion from the proceeds, combine that with several billion more from the spinout of Time Warner Cable, and then go shopping for really big media properties.

All of that, hopefully, would convince investors that the meandering media conglomerate had a plan, momentum, etc. And then they would finally lift Time Warner (TWX) shares out of the high teens, where they had been mired for many years.

But now an AOL-Yahoo (YHOO) deal seems stuck in neutral, the rest of the Time Warner empire is in cost-cutting mode, and a stock price in the high teens must look pretty good to investors, whose stock is currently worth about $9 a share.

Hence, a proposed 1-2 or 1-3 stock split, which Time Warner management wants shareholders to approve next month. From the SEC filing: “The Board of Directors believes that effecting a reverse stock split, resulting in fewer shares of the Time Warner Common Stock being outstanding, is likely to increase the market price and improve the marketability and liquidity of the Time Warner Common Stock.”

Translation: You got a better idea?

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work