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14-08-2024 : Riddle for your week-end

BlackRock is the world's largest asset manager, with around $10,500bn in assets under management. Its share price has risen by 9,097% since its IPO in 1999. 

Blackstone is the world's largest alternative asset manager, with $1,100bn in assets under management. Since its IPO in June 2007, its share price has risen by 317%.

Which has the highest market capitalization?

The answer is given in the Vernimmen.com newsletter in its July issue.

16-06-2024 : Privatizing France Télévisions?

In 2023, the France Télévisions group generated sales of €3 bn, including €2.4 bn in public subsidies (the licence fee was abolished in 2022), and €432 m in advertising revenue, taken from a TV advertising market declining by 1.4% a year and totaling €3.5 bn. France Télévisions has €429 m in equity, and negative free cash flow of €67 m in 2023, the same as in 2022. Net income in 2023 was €14 m, compared with a loss of €48 m in 2022.

As the Rassemblement National plans to return to the French citizens the €2.4 bn in annual subsidies paid out, an additional €2.4 bn in advertising revenue is needed to break even, representing 69% of the market volume, giving France Télévisions an 80% share of the TV advertising market, with only 29% of the audience. 

Even if this feat were achieved, which would mean depriving TF1 and M6 of 90% of their advertising revenues, France Télévisions would still only break even. To justify the €3 bn figure given by Sébastien Chenu as the proceeds from the privatization of France Télévisions, and taking into account the M6 and TF1 P/E of around 8, France Télévisions would have to generate net income of €375 m, which is about the same as the combined net income of TF1 and M6 (€429 m). This is quite coherent, given that €3 bn, the proceeds from the privatization of France Télévisions according to Sébastien Chenu, is roughly the sum of the market capitalization of M6 and TF1. 

To reach these €375 m, it would be sufficient to generate €500 m in additional advertising revenue, leading to a 96% share of the TV advertising market, with 29% of the audience. Alternatively, lay off half of France Télévisions' 8,950 employees (salaries of € 1030 m in 2023).

As for a takeover of France Télévisions by M6 or TF1 mentioned by Philippe Ballard, spokesman for the Rassemblement National, apart from the fact that it could only be partial and would involve dismantling the company to comply with anti-trust rules (no more than 7 national TV programs for any one person), it does nothing to solve the problem of finding €2.4 bn a year to compensate for the loss of current public subsidies - equivalent to TF1's sales, or 185% of M6's sales.

If you find it hard to believe in the feasibility of these business plans, perhaps you're wondering how, in 1987, TF1 was able to be privatized, and survive the absence of licence fees?  Well, the TV advertising market was booming at the time, with annual growth rates of 10-15%, compared with the current 1.4%. This changes everything.