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Hollywood has taken full advantage of this year’s stock market frenzy, seizing on the David vs. Goliath and retail trader vs. hedge fund storylines, which have already sparked about a dozen scripted and documentary television and film projects. But a month before “meme stocks” like GameStop and AMC Entertainment took flight and captured the public imagination, many of the world’s entertainment giants were the beneficiaries of a nine-figure windfall driven by retail trader enthusiasm.
According to filings with the Securities and Exchange Commission, ViacomCBS netted $213 million, Discovery Inc. saw a gain of $126 million, AMC Networks saw gross proceeds of $96 million, and Comcast has sold $15 million (so far).
The stock that delivered the windfall was FuboTV, led by CEO David Gandler and executive chairman Edgar Bronfman Jr., which was trading under $10 per share after its IPO last October, but skyrocketed in December, hitting a peak of $62 per share on Dec. 22. Thanks to some lucky timing, many big entertainment companies cashed out to the tune of $450 million and counting.
Fubo is a virtual multichannel streaming bundle, similar to YouTube TV, Sling TV, and Hulu with Live TV. But unlike those other streamers, which are associated with legacy pay TV bundles, or giant tech companies, Fubo is an independent player, focused on superserving sports fans.
In order to secure carriage deals for popular channels, the company struck unusual agreements with the major entertainment companies, including equity stakes in itself as part of the deals.
Fubo went public last year, and those equity stakes became marketable at the end of December … right after traders on Reddit, Robinhood and TikTok discovered the stock, sending its share price soaring. That being said, the company’s rise wasn’t quite as detached from reality as, say GameStock.
FuboTV’s share price began to rise after it reported better than expected subscriber numbers in November, and as it unveiled its intention to carve out a piece of the nascent sports betting business. In other words, it had a growth story to tell. Some analysts, including Michael Pachter of Wedbush securities, were bullish on the stock, believing it had a real chance to integrate sports betting capabilities into its service. Pachter wrote in his December note that Fubo could be “the first comprehensive alternative to pay-TV.” The company, whose plans start at $65 per month, expects to end March with 520,000 to 530,000 subscribers.
The strong growth numbers, sports betting angle and interest from short sellers caught the attention of traders on platforms like Reddit’s WallStreetBets, finance TikTok, RobinHood, and elsewhere. “Currently a stock with great growth, a niche market and might be a likely acquisition target,” wrote the user “dhsmatt2” on WallStreetBets before its rally, adding that, “the name is meme-worthy.”
By contrast, AMC Entertainment (which saw its share price rise five-fold overnight Jan. 27) had some good news (announcing new financing that would allow it to avoid bankruptcy, as well as positive news around the rollout of the COVID-19 vaccines), but nothing that would justify the sudden share price surge.
GameStop, of course, became completely detached from reality, at its peak claiming a market cap of $28 billion, bigger than many of the video game companies whose games it sells. Even Keith Gill, the trader who goes by the nom de plume “DeepF*ckingValue” on Reddit’s WallStreetBets forum and the man many credit with starting the GameStop craze, testified before the House Financial Services Committee Feb. 18 that “GameStop’s stock price may have gotten a bit ahead of itself last month.”
But while GameStop and AMC have seen their share prices fall back to earth (albeit above where they were just a couple of months ago), FuboTV’s share price continues to trade above where it was in November (it closed at $27.31 on March 8). That is good news for Comcast and The Walt Disney Co., which still owned millions of shares in Fubo as of the end of 2020. With Comcast slowly selling its investments, from Peloton to Snap, it is likely only a matter of time before it exits its stake in Fubo.
Of course, if they want to sell, the right time may be right now. While analysts like Pachter and Needham’s Laura Martin have been Fubo bulls, others have been more skeptical of the company’s chances, noting the tough economics and thin margins of the multichannel video business, and entrenched leaders in sports betting such as DraftKings and Barstool Sports.
“Fubo is already a subscale vMVPD that has no leverage versus programming behemoths. Now they want to enter the sports betting space as a sub-scale sportsbook which will lead to even greater value destruction for shareholders,” wrote LightShed Partners’ Rich Greenfield in a January research note.
Fubo itself, however, is convinced its strategy has legs. In its quarterly shareholder letter released March 2, Gandler and Bronfman revealed plans to roll out free-to-play games in Q3 of 2021, and deals with MLB and the NBA to be an authorized gaming operator.
“Our goal is to develop fuboTV into a new kind of media company that combines streaming video and interactive sports wagering,” Gandler and Bronfman wrote. “There is so much more to come from fuboTV.”
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