Oprah buys into Weight watchers

[WanderingWinoZ]

www.forbes.com/sites/laurengensler/2015/10/19/weight-watchers-oprah-winfrey/ 


Shares of Weight Watchers were soaring on Monday after billionaire media mogul Oprah Winfrey announced she has taken a 10% stake in the weight loss company.



Winfrey will spend $43 million on the investment, according to a regulatory filing, buying 6.4 million newly-issued shares at $6.79 apiece. Winfrey will also receive options to acquire an additional 5% stake.



“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,” said Winfrey, a member, in a statement. “I believe in the program so much I decided to invest in the company and partner in its evolution.”


Winfrey will also join the board of directors and act as an adviser for the company.



Shares of Weight Watchers soared 92%, or $6.27 per share, on the news.



“Through our conversations, it became clear that there is tremendous alignment between Oprah’s intention and our mission,” said Weight Watchers CEO Jim Chambers in a statement. Chambers noted that the company hopes to become more about leading a happy, healthy life rather than just losing weight, and Winfrey should be of help toward that end.



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Oprah’s investment “will not just bring attention to the stock, but will accelerate sales and profit recoveries,” wrote S&P Capital IQ analyst Efraim Levy. “We partly liken this to activist investor benefits, with Oprah bringing WTW free publicity and media savvy.”



Yet, the verdict is still out on how far-reaching the so-called Oprah effect will be. ”While Oprah’s involvement should help drive recruitment, the specific membership uplift that she can drive remains uncertain, and in light of an increasingly competitive environment WTW continues to remain a ‘show me’ story, in our view,” wrote Citi analyst Gregory Badishkanian in a note to clients.



Her endorsement of Weight Watchers also differs from her book club recommendations, for instance, since she has a vested financial interest in how the company does.



Winfrey’s investment comes at a time when Weight Watchers membership has suffered amid competition from free fitness apps and wearables. Fitbit, for instance, which makes wearable fitness trackers, found success in the public market this summer and its shares have soared 84% from its IPO price.



Meanwhile, as of Friday’s close shares of Weight Watchers were down 68% year-to-date and 71% over the last 12 months.



Winfrey, ranked #211 in the latest Forbes 400 list of the richest Americans, is worth an estimated $3 billion. With this investment, she becomes one of the company’s largest investors, second only to Fidelity and private equity investor Raymond Debbane, who owns 51%. (Read more: The Mystery Man Behind Weight Watchers And The Private Equity Deal Of The Century)



The company, founded in 1963, has long used celebrity spokespeople to bolster its image and membership, including names like Jennifer Hudson, Jessica Simpson and Jenny McCarthy.