Truth be told, the term “game changer” is one that’s used a little too often within the investing world. While news is often interesting and even catalytic, rarely are the echoes of news (or its impact) still echoing a year later.
News that television mogul Oprah Winfrey has taken on a huge stake in struggling weight-loss company Weight Watchers (WTW), however, is one of those rare instances that can truly be called game changing for the company.
In gambling terms, Winfrey’s interest is a so-called “hard six” for Weight Watchers … a roll of the dice that’s only seen about 3% of the time, but pays off bigger than any other bet.
That’s because Oprah is arguably the only celebrity that can exert the most marketing influence on potential customers of Weight Watchers at a time when it’s the one thing the organization needs most.
Oprah to Own 10% of Weight Watchers
As of Monday morning, self-made media sensation Oprah Winfrey is set to own 10% of Weight Watchers, with the rights to buy 5% more — at a price much less than today’s post-news price of WTW stock — if she so chooses. All told, she paid $6.79 apiece for 6.4 million shares of WTW.
The $43.2 million investment also bought Winfrey a seat on the company’s Board of Directors.
The stock soared on the surprising reports of the celebrity’s investment and pseudo-endorsement, of course. As of the latest look, WTW was up more than 116% for the day, even without investors fully grasping exactly what (if anything) the connection to Winfrey would even mean regarding the company’s future. That’s not to say that it wasn’t necessarily wrong for those investors to assume the best regarding the pairing.
Ownership Isn’t the Point
Granted, the sizeable stake in Weight Watchers does speak boatloads about the stock’s and the company’s unappreciated potential. Even if Winfrey wasn’t taking on any stake in the company whatsoever, however, linking her name to the company’s is powerful in itself.
It’s called the “Oprah Effect.” Nobody else has it except her, and if she directs her own “effect” in the direction of a company, product, or person, things change for the better.
Case in point: Rachel Ray, Dr. Phil and Suze Orman were proverbial nobodies before they began making regular appearances on Oprah’s talk show. Thanks to the Oprah Effect, all three have since been given their own television shows thanks to their initial exposure on the Oprah Winfrey show.
She’s done it with books too. Uwem Akpan’s Say You’re Not One of Them — a collection of short stories about Africa — saw its number of copies in print grow ten-fold in 2009 after Winfrey highlighted it in 2009.
And of course, there are countless numbers of products and services that were pulled out of the dregs of obscurity into the land of high-visibility once featured on one of Winfrey’s “My Favorite Things” lists.
To be fair, turning Weight Watchers around is the celebrity’s biggest challenge yet. Unlike most of her prior projects, the name is already known and the public is well aware of what it does. The public simply has little to no reason to care, as alternatives to Weight Watchers’ foods and weight-loss plan are ubiquitous (with some of the comparable digital apps available for free).
Yet, with the right spin and positioning, coupled with Winfrey’s star power, the current chemistry for a turnaround for Weight Watchers may be just about right.
The Planets Align WTW Stock
While there are still plenty of potential pitfalls ahead for Weight Watchers regardless of who’s associated with it, this is one pairing that’s coming together at the right time, in a philosophical sense.
On the surface, it may sound like nothing more than corporate rhetoric when the company mentioned in Monday morning’s press release that is was aiming to “prioritize overall health and wellness,” as opposed to merely helping spur weight loss. The difference is a lifestyle one, and addresses the fact that weight loss isn’t an activity — it’s a lifestyle.
It’s a parallel to something Oprah Winfrey herself has quietly done over the past three decades. That is, transform a television show, followed by an entire channel, from mere entertainment to lifestyle platform; dispensing advice (for better or worse) about the values and choices individuals should adopt and make.
It’s in that vein where Winfrey and Weight Watchers intersect. If Oprah — who has grappled with weight issues of her own — tells consumers to buy the product, they likely will.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.