Weight Watchers’ (WTW) stock just got heftier, thanks to Oprah Winfrey.
In a blockbuster announcement, Weight Watchers declared that billionaire mogul Oprah Winfrey is investing a 10% stake in the company.
Oprah’s stash? 6.4 million newly-issued shares purchased at 6.79 apiece.
That’s a cool $43 million. Cha-ching.
The groundbreaking partnership between Oprah and Weight Watchers was the catalyst for a sudden swell in stock prices after the October 19 announcement.
Stock prices soared 105% to 13.92 and continued to rise through Friday before pulling back a touch.
Oprah’s stake in the company is a strategic partnership designed to promote the company’s expanded vision. Instead of focusing primarily on weight loss, the company’s plan is to reach a broader audience—to educate people how to lead healthier, happier lives.
Oprah’s personal testimonials have made superstars out of Dr. Oz, Dr. Phil, and Suze Orman, just to name a few.
Sales for products like Spanx, iPad, and Kindle skyrocketed after Oprah’s personal endorsements.
Will Weight Watchers enjoy a similar Oprah effect?
It’s certainly what they’re banking on.
Analysts expect Oprah’s influence and media presence to accelerate profits and be the shot in the arm the company needs to prosper.
Weight Watchers’ popularity has dimmed over the years due to competitors’ free fitness tracker apps. The company currently charges for its apps, with monthly fees starting at $19.95 a month.
As FitBit (FIT) and MyFitnessPal have gained users, Weight Watchers has struggled to keep pace.
Weight Watchers’ operating cash flow has seen a $33.73 million decrease compared to the same quarter last year. It’s also growing much slower than industry average.
Furthermore, Weight Watchers shares have declined by approximately 73% over the past year, and company earnings have weakened since 2011. In the most recent quarter, earnings per share dropped by 48%.
In a signed five-year agreement, Oprah has agreed to allow the company to use her name, likeness, and image to promote its brands.
Oprah will also join the Board of Directors and act as an adviser.
Along with her original stake in the company, Oprah will receive options to purchase an additional 5% fully-diluted shares.
The 61-year-old billionaire mogul has admitted to food addiction and yo-yo dieting for decades. Part of her agreement with the company is to use the mobile app and work with a personal coach while participating in the program. She’s also agreed to candidly share her experiences with the public.
Weight Watchers is the brainchild of Jean Nidetch, an overweight housewife from Queens New York. Discouraged by her dieting experiences, she invited a few friends to her apartment in September 1961 to offer mutual support for losing weight.
The group was successful. Everyone lost weight. As word spread, the meetings became more popular.
Weight Watchers incorporated in May 1963, and it didn’t take long for the company to become a leader in the weight-loss industry.
Backed by the tremendous star power of Winfrey, one of the world’s most influential and powerful businesswomen, with a net value of $3 billion, this move could push Weight Watchers into the forefront of the health and wellness industry once again.
This post originally appeared in mainstreetinvestor.com.
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