When I invested in Time, its book value was greater than the share price, there was the potential to sell the Blue Fin building, insiders were accumulating shares. Its free cash flow yield was north of 14%, a very attractive figure.
I sold it because Time invested in Viant to compete with Google and Facebook in selling specialized ads; a big mistake in my view. The dividend payout was no longer covered by the 2015 free cash flow, as there was no free cash flow.
One of my hidden value ideas was that the company was spending >$ 150m on terminations with its employees, which at the moment would be a big expense, but would result in savings in wages in the future. This expense has now disappeared, but for a company like Time, its SG&A expenses are already half of the revenues! And it has increased. Insiders no longer buy shares, preferring instead to receive them as payment from the company, diluting the buyback they proclaim. I invested in Time for being a cheap company and now sell for believing that it is no longer cheap. And management sets a target of 2.5 EBITDA debt, a figure that I consider extremely high.
I lost money on this investment. A complete failure for me.
Originally published on 05/06/2016