It may not be one of Viacom’s bigger stakeholders, but that hasn’t prevented SpringOwl Asset Management from making a lot of noise about the direction of the company.
After Viacom’s stock hit a 52-week low this week, the activist investor called for the embattled media conglomerate to elect six independent board members. SpringOwl, which owns an undisclosed stake in the company behind Paramount, MTV and Comedy Central, is also pushing for Viacom to oust Philippe Dauman, its CEO and newly appointed executive chairman.
The hedge fund is agitating for change at a difficult time for Viacom. On an earnings call on Tuesday, Dauman slammed “naysayers, self-interested critics and publicity seekers” and bristled when asked about his elevation to the chairman role. Viacom’s stock plunged 21% that day.
“He is not the right CEO to take the company forward,” said Eric Jackson, managing director of SpringOwl, in an interview with Variety. “He was defiant and arrogant on the earnings call on Tuesday, and he placed the blame for the stock’s poor performance on everyone but himself. No single event could power the stock upwards as much as the announcement that [Dauman] is stepping down.”
In a press release, SpringOwl questioned the autonomy and effectiveness of the six of Viacom’s 11 board members who are supposed to serve as independent directors. It notes that some have conflicts, such as Deborah Norville, who hosts a television show that is produced by CBS, which is owned by Viacom founder Sumner Redstone, while other members, such as Charles Phillips and Blythe McGarvie, have little media or digital experience. To Jackson’s thinking, the board failed by voting 10 to one to promote Dauman as chairman. Only Shari Redstone, Sumner Redstone’s daughter, opposed his elevation.
“We need a refresh of the board,” said Jackson. “It makes you wonder just how independent they are.”
A spokesman for Viacom pointed to the improvements in the company’s television assets, like Nickelodeon, as well as recent hits from Paramount, such as “The Big Short,” as evidence that the company is strongly positioned going forward.
“Viacom’s board and management team are completely focused on delivering long-term value to shareholders,” the statement reads. “We are looking to the future and the opportunities ahead. We are encouraged by the growth in our strong international business, the ratings upswings at most of our networks, Paramount’s strong start in 2016, our leadership position in advertising technology and other positive recent developments. “
Jackson said he has yet to hear back from Viacom’s management about his proposals. It’s not clear how much influence SpringOwl will have in shaping Viacom’s future. The hedge fund manages about $300 million in assets, but it has not revealed its position in Viacom. As the New York Times noted recently, SpringOwl’s holdings must be below the 5% level that requires it to file with regulators. Moreover, Sumner Redstone owns 80% of the voting shares of the company, giving him control over its governance.
“We may not be the largest fund out there, but that doesn’t make a difference,” said Jackson. “We went public because we thought this was a company whose assets were tremendously undervalued, and we felt we had some solid arguments about what the company needs to be doing.”
Jackson said he continues to believe the company is undervalued, noting that Paramount has a strong film library and has made strides in making its business more global. He said that SpringOwl has increased its position this week. Viacom shares were trading at $32.14 on Thursday afternoon, up 2.41%.
“If it had good value at $40, we think it has better value now,” he said.
SpringOwl isn’t the only shareholder with grievances. Mario Gabelli, the second-largest shareholder in Viacom behind Redstone, is pushing to sell a stake in Paramount Pictures to Jack Ma’s Alibaba or another major investor, telling Variety last week, “Philippe has six to 12 months.” There are also continued reports about Redstone’s failing health, particularly after he relinquished the chairmanship at both Viacom and CBS in recent weeks, and mounting speculation in investment circles that sweeping changes could still be in store for the company.
“These days, in an era of transparency and social media, no matter how big or small the shareholder, it’s difficult to brush off ideas that take a life of their own,” said Jackson. “We are confident our ideas have struck a chord.”