Time Inc. stock knocked down 4% in market debut

Shares in Time Inc., publisher of magazines including Time, People and Fortune, fell four per cent in their first day of trading after spinning off from Time Warner Inc.

Split from Time Warner comes as magazines hard hit by falling ad sales, readership

Time Inc. is being spun off its Time Warner parent in an era where magazines are in trouble. (Kathy Willens/Associated Press)

Shares in Time Inc., publisher of magazines including Time, People and Fortune, fell four per cent in their first day of trading after spinning off from Time Warner Inc.

Time stock was down 4.6 per cent to $22.40 in morning trading, but recovered to $23.30 at the close of trading, while parent company Time Warner, which represents cable, television and movie interests, rose slightly to $68.99.

Time Warner stockholders received one share of Time Inc. stock for every eight shares of Time Warner stock they held. 

Reed Phillips, co-founder of media investment bank DeSilva + Phillips, sees the spinoff as a significant development.

"Time Inc. is the biggest magazine company in the world and there hasn`t really been a significant event in magazine publishing in quite some time," he told CBC's The Lang & O`Leary Exchange.

The spinoff is unusual in that it becomes the only U.S. stock representing just magazines. Most media companies are supporting their magazine or newspaper interests with other operations, such as cable companies or other entertainment interests.

"This illustrates that magazines are no longer seen as an attractive part of a corporate infrastructure acriss media that includes television, cable, radio, movies, entertainment," Phillips said.

Time, which had about 600 layoffs in 2013 with more probably on the way, will be expected to operate as a stand-alone unit.

Can magazines pay?

 Time Inc. owns 90 magazines and 45 websites, including Sports Illustrated and Entertainment Weekly and has an estimated market value of about $2.5 billion.

Time Inc.’s advertising revenue was $1.81 billion in 2013, down from $1.93 billion in 2010. Its circulation revenue fell $1.13 billion from $1.3 billion in the same period.

The move to break off comes as magazines struggle with declining circulation and advertising revenue as consumers shift to reading on smartphones and tablets. Many analysts had predicted Time Warner shareholders would quickly sell off their Time stock.

"There is no doubt we face strong headwinds in this business," CEO Joe Ripp said in a memo to employees, adding that Time Inc has "the power, the intelligence, the resources and the drive to succeed no matter what headwinds we may face."

Digital strategy

Ripp said the value of operating as a stand-alone unit is that the company has the discretion to reinvest in its assets and rebuild to focus on new technology.

Phillips said Time will have to experiment with new ideas, like Conde Nast which is moving into video and entertainment,

"From the spinoff, Time Inc really needs to emerge very different from being a magazine publisher; it needs to look more like Time Warner to be attractive to investors," he said. "They need to do things like they did 18-20 years ago – invent the next HBO, and be much more focused on the digital future." 

Several media companies, including Wall Street Journal publisher and Fox News owner News Corp, have split in recent years to separate their print properties from faster-growing TV and cable businesses.

Tribune Co also plans to cleave off its newspaper properties, including the Los Angeles Times and the Chicago Tribune, from its TV stations this year.

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