Shares of Weight Watchers (WTW) are up 80% this morning after Oprah Winfrey bought 10% of the outstanding shares with some option and warrant kickers. But the real story here is that of Winfrey overlaying her brand with WTW, and becoming a symbol for those who want to lose weight. According to the release, Oprah became an adviser as well as a regular member of the program who would "candidly share her experiences and perspective along the way."
"Weight Watchers has given me the tools to begin to make the lasting shift that I and so many of us who are struggling with weight have longed for" she said in the statement. "I believe in the program so much I decided to invest in the company and partner in its evolution."
I wrote about WTW back in February and noticed the lack of participation in this sector by portfolio managers since Jenny Craig went private. It's clear that Oprah's internal asset manager has done his homework, because the stake Oprah takes puts life back in the sector. Today's move (upward of 80%) sent all the short sellers scrambling, and this is reflected in the volume as you have 24 million shares trading in the first hour from a stock that averaged one million per day previously.
Weight Watchers Still Looking Thin for 2015
Few realize today's move still leaves shares down 50% for the year, though, as shares opened 2015 at $24, so this buy was well calculated by the Harpo team that manages Oprah's assets. It's also important to know that Oprah has been following some of the lessons from Jenny Craig, who made hundreds of millions of dollars utilizing public shares running a similar business.
Harpo Group (Oprah's Asset management Firm) manages the Family Office structure for Oprah's personal assets, and they hope that shares regain the previous form of $85 back in 2011, when the company’s valuation was north of $5 billion. Oprah bought her piece today for $50 million with hopes that shares can be a 10 bagger.
Revenue will obviously be key for WTW, and figuring out how to tap the millennial market will be a driving factor. Oprah's experience in social media will no doubt help across the board, and anyone using Facebook (FB) today knows the baby boomer crowd uses social media more than the younger generation as a tool to share ideas, brands and likes.
Oprah has been a force since her days as a small town newscaster. She has championed women in business and is an inspiration to women all over the world. I'm glad to see her take a stake in a company in our small cap universe, and begin the task of turning it around.