Make no mistake. The sharks are circling. The stock is one of the biggest movers of 2016, when most stocks have been killed. Year to date, Time Warner (TWX) is up 10% and the S&P 500 is down more than 5%. The stock has gone from the low $60s to the low $70s.
For the last few days, there have been rumors in the papers that both Corvex and Carl Icahn were in the stock. Corvex's founder is Keith Meister. He used to work with Icahn. And Icahn made a run to break up Time Warner in 2006, when CEO Jeff Bewkes was the #2 behind Dick Parsons.
Although Icahn said Monday night that there was no truth to the rumor that he owned shares in Time Warner, it would shock me if there weren't one or more activists who have built up a position in the stock over the last couple of weeks.
At the same time, there was a story last week in Benzinga stating that Fox (FOXA) was interested in taking another run at Time Warner for $105/share vs. the $85/share they proposed the last time. Fox quickly shot down the rumor, saying they had no plans to do so.
Where there is smoke, there is fire. Something is going to happen to the company this year. My guess is that it will be sold.
There is good reason for the activists to be sniffing at it. Rich Greenfield of BTIG recently argued in his 2016 media predictions that activists would take a run at Time Warner again this year. Why? To spin off HBO.
One could argue that Netflix's (NFLX) biggest threat in Over-The-Top (OTT) is HBO, with its HBO Now product. It doesn't have to spend gobs of money letting people know its brand the way that Hulu does. HBO is already part of our collective unconscious.
Netflix is valued today at $50 billion. HBO Now has a fraction of the streaming sub base as Netflix but, over time, it could conceivably go after the same domestic and international audiences. That's more likely to happen more aggressively as a stand-alone company. And perhaps it should be based in California to make the most of that opportunity, and not at Columbus Circle in New York.
Broken up into its pieces, you're talking about a Time Warner with a stock price potentially over $100 vs. $71 today.
But why would Jeff Bewkes want to do that? He just signed an extension to stay at Time Warner until 2020. And if he spun off HBO, he'd be the CEO of Turner and Warner Brothers. Where's the fun in that? I suspect Bewkes would fight to keep his empire together, and that's why a sale of Time Warner makes the most sense for all parties involved.
Although there are many suitors who would want to own HBO, I suspect that the most aggressive potential buyers of Time Warner as a whole or HBO as a stand-alone will be Action Alerts PLUS charity portfolio holdings Apple (AAPL) and Google (GOOGL) and Growth Seeker portfolio name Amazon.com (AMZN).
We are already hearing rumors from John Ourand of Sports Business Journal that Amazon is the most aggressive of the digital players in going after the digital rights for Thursday Night Football with the NFL. Imagine if it owned HBO?