MultiChoice, DSTV & GoTV’s Parent Company, has in the past six months seen its share price plunge by 49%, wiping R32 billion (~$23 million) in shareholder value.
According to reports, MultiChoice’s stock was trading at R147 on the 6th of March, 2023. But at the close of trade on the 21st of September, the pan-African broadcaster’s share price was trading at R74—a 49% decline.
This decline questions the inside activities of MultiChoice as many are wondering what could be the possible cause of the downturn. Join us as we explore some factors that could have led to the $23 Million drop in the last six months.
Unmet Earnings Projections and Economic Conditions
In March, MultiChoice reported that due to load-shedding and a weak economy, activity in its South African business had significantly reduced, and its earnings would miss projections.
This announcement led to a 14% decline from the previous day’s trading value.
$108 million KingMakers investment loss
Pan-African broadcaster MultiChoice had in September 2020 acquired a 20% stake in Nigerian online sports betting company KingMakers, then BetKing, for R1.9 billion (~$112 million). It also increased its stake to 49% for $281.5 million, bringing the total value of its KingMakers shareholding to R5.9 billion (~$393.5 million) in 2021.
However, MultiChoice in its latest financial results disclosed that the naira devaluation in Nigeria and the expansion cost had caused an R2 billion (~$108 million) write-down in its KingMakers investment.
Showmax 2.0 Investment and Shareholders Reactions
The company’s decision to invest more in “Showmax 2.0” and withhold dividends, coupled with substantial drops in earnings and headline earnings per share, did not sit well with the shareholders, leading to a decrease in share value.
Multichoice, NBCUniversal, and Sky earlier announced that the partnership will see the relaunch of a new version of Showmax which will be powered by NBCUniversal’s Peacock technology platform and broadcast English Premier League matches.
JP Morgan Chase Downgrade of MultiChoice’s stock
In July, JP Morgan Chase & Co. downgraded MultiChoice’s stock rating from “neutral” to “underweight.” An “underweight” rating means JP Morgan expects the company to underperform based on the average total return of stocks in its coverage universe over the next 6 to 12 months.
Newsmen reported that the company was downgraded because J.P. Morgan believes it intends to “throw considerably more money at Showmax than what the market expects.”
As a result of the downgrade, MultiChoice plummeted by 12% on the same day, ending the day trading at R82 from the previous day’s R94.
Withdrawal of DStv from Malawi market
The withdrawal of DStv service from the Malawi market could be another reason why DSTV & GoTV Parent company experienced the $23 million.
Last month, newsmen gathered that Multichoice was exiting Malawi following a high court ruling preventing the company from invoking further price increases for DStv service in the country.
The Malawi Communications Regulatory Authority (MACRA) had in July obtained an interim injunction from the country’s High Court.
The injunction prohibited Multichoice Malawi from changing or modifying DSTV tariffs. The high court further ordered Multichoice to comply with the order, leading the broadcaster to terminate its DStv offering in Malawi.
Possible Reasons for the Downturn
Earlier this month, MultiChoice announced several leadership changes, including the appointment of Marc Jury as interim CEO of Showmax, Rendani Ramovha as SuperSport CEO, and Keabetswe Modimoeng as group executive of corporate affairs and stakeholder relations.
In a statement, MultiChoice also revealed that “Given shareholder preference for an independent chair, it was always envisaged that Mr Patel would step down at the appropriate time once a suitable replacement as independent chair had been identified.”
Rise in internet streaming services
Multichoice could also be suffering the effect of slow innovation. Although there have been remarkable announcements like the launch of a new integrated payments platform in partnership with Rapyd and General Catalyst, social platforms like TikTok may have discouraged people from renewing their subscriptions.
DStv’s parent company also announced plans to launch a technology division headed by the newly appointed group chief technology officer, Nyiko Shiburi.
It explained that the new division will house the broadcast technology division, enterprise business systems, group digital, DStv Streaming technology, and project management office.
Since the announcement in April, there has not been any notable development.
Abdul Samad Rabiu’s journey to becoming one of Africa’s wealthiest magnates is…