Will Playboy be sold? Don't bet on it

Posted Dec 22nd 2008 11:59AM by Zac Bissonnette
Filed under: Management

Earlier this month, I reported that Christie Hefner's reign of terror as CEO of Playboy Enterprises Inc. (NYSE: PLA) was mercifully coming to an end. Over the 20 years that she was CEO of the company her father founded, the brand's circulation, relevance and stock price all declined precipitously.

Her departure gave the stock a bit of an upward jolt, and now there is considerable speculation about what will come next for the company and its battered shareholders. Portfolio's Jeff Bercovici reports on a rumor that Playboy could possibly be taken private following Hefner's surprise departure. While market conditions aren't ideal for financing, given the Hefners already own 35%, the amount would be manageable, Bercovici writes.

Could the rumor be true and Hugh is taking the company private? I doubt it for a few reasons. First, the company isn't exactly generating a lot of cash, so it's unclear where the money to service the debt from a leveraged buyout would come from.

Second, the company's dual-class voting structure gives Mr. Hefner total control over the company's fate, and to heck with the rest of the shareholders. That means he can do whatever he wants, including letting his kid run the company into the ground for two decades.

The listing as a public company gives Hefner the best of both worlds: He can still run it as though it were a private company, and benefit from the liquidity that comes with an NYSE listing.

If Playboy had better corporate governance, there might be a reason to take it private. But for now, it's Hugh and family's party palace at the expense of shareholders: And why buy it when you can live in it for free?

Tags: PLA, Playboy

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Reader Comments (Page 1 of 1)

12-22-2008 @ 1:32PM

BHarrison said...

Playboy's history is somewhat like the economy. In earlier days Playboy made their fortune by being the first to provide rather racy soft porn, relatively speaking. And now with the excesses of open pornography, they have lost their market.

In earlier times, banks/FIs provided a little access to some of the "insider trading" occassionally. Then when virtually everyone was allowed access to all of the pyramid and Ponzi schemes, the Banks/FIs wound up losing their customer base.

It appears that "excesses" just aren't too profitable or stable. "Moderation and INTEGRITY in all things usually works out best. True, unregulated "democracy" where anyone can do whatever they want to do without regard to the rights and interests of others, winds up being anarchy.

Society and FIS/corporations need prudent and reasonable "regulation" to keep things "balanced" to maintain stability.