Winfrey is buying approximately 6.4 million shares of Weight Watchers at $6.79 per share. It has paid singers Jessica Simpson and Jennifer Hudson to promote its plan. She will also receive options to buy an additional 5% of the company’s fully diluted shares.
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The deal comes as Weight Watchers faces tough competition from new diet and fitness apps, as well as a growing trend away from calorie counting toward overall wellness. Of the around 730 elite funds we track, 15 funds owned $343.1 million of the company’s shares (representing 15.10% of the float) on June 30, versus 20 funds and $415.68 million on March 31.
While Winfrey is a huge winners from the announcement, she’s not the biggest.
Winfrey, who is taking a seat on Weight Watchers board of directors, has reaped the benefits of the company’s program and hopes to usher it into a successful second life.
Implications – While Oprah‘s involvement should help drive recruitment, the specific membership uplift that she can drive remains uncertain, and in light of an increasingly competitive environment Weight Watchers continues to remain a “show me” story, in our view.
Weight Watchers could use a boost. King recently revealed to fans that she was embarking on a weight loss journey of her own using Weight Watchers after stepping on the scale to a slight shock. That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
“We are expanding our objective from focusing on weight loss alone to more broadly assisting people lead a healthier, happier life”, said Jim Chambers, President and CEO, Weight Watchers global, Inc. During the same quarter previous year, the company earned $0.98 EPS.
A stamp of approval from Winfrey during her talk show was powerful.
In five years she would have the right to sell all of her shares.
The television mogul, author and actress is also known for spotting talent – books chosen for her Oprah’s Book Club regularly end up on best-seller lists.
While the publicity is undoubtedly helping shares of Weight Watchers Monday, the price jump could be the result of what is known as on Wall Street as a “short squeeze”.
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Weight Watchers worldwide (NYSE:WTW)’s share price rose 101% on Monday after Craig Hallum raised their price target on the stock from $10.00 to $20.00, AnalystRatingsNetwork.com reports.
