comScore Considers Stock — and Strategy
Beleagured comScore will now be hoping its future more resembles Charter Communications’s past than that of most media companies that have suffered through having their stock delisted by NASDAQ.
Even before the delisting, the ratings-measurement firm — which has been trying to unravel an accounting quagmire for nearly a year — took another big hit after it disclosed it wouldn’t meet a Feb. 23 deadline to file financial statements with the Securities and Exchange Commission. It also said it could not guarantee it could meet the next filing target of this summer. Shares in comScore plunged nearly 30% early on Feb. 6 after the delay was announced.
NASDAQ’s hand was forced, and the exchange said it would delist the stock on Feb. 8.
Losing a NASDAQ designation is never good for a stock. While comScore began trading on the over-the-counter market on Feb. 8 — it closed at $22.98 per share that day — OTC stocks are typically lightly traded. Com-Score shares are down about 43% since March 2016.
IRREGULARITIES AND DELAYS
comScore’s troubles date back to March of 2016, when it first said it had been notified of possible irregularities. The company later said the problems stemmed from a practice of booking non-cash sales — mainly barter transactions — as revenue and restated results for the three years from 2013 to 2015.
The company lowered 2015 revenue to $339.9 million (about 8% below what was originally reported); its loss from operations for that year is now $10.8 million, about four times larger than previously stated.
comScore restated revenue for 2013 to $312.9 million instead of $329.2 million and for 2014 to $283.6 million instead of $286.9 million. comScore also said barter deals could have been used to inflate revenue figures that were the basis for compensation awards to top executives, including then-CEO and co-founder Serge Matta.
Matta resigned in October, replaced by cofounder Gian Fulgoni, a board member who assumed the helm on Aug. 10.
comScore’s delisting comes about a year after the ratings firm’s big move to merge with rival measurement company Rentrak in a deal valued at about $780 million. Combining Rentrak’s set-top box data measurement expertise with comScore’s digital knowhow was, at the time, seen as a viable alternative to ratings measurement juggernaut Nielsen. Instead, comScore has been bogged down sorting through mounting problems just as the measurement market is heating up.
Fulgoni said in a statement: “While we are disappointed with the pending delisting, our growth prospects remain robust. We have an extensive portfolio of valuable services that are needed by our more than 3,000 clients and we compete in fast-growing markets. We remain focused on measuring what matters for our clients to make audiences, consumer behavior and advertising more valuable for our clients — across all platforms. We are confident that we have the right strategy and team in place to execute on our company’s exciting vision.”
“The thing that troubles me is that they weren’t able to resolve this,” Telsey Advisory Group media analyst Tom Eagan, who follows comScore, said. “The amount of non-monetary revenue is small, about 7% to 8% [of total sales].”
That leaves the question of whether the problem goes deeper, or if the auditors just weren’t confident in signing off.
In December, Nielsen, which has been testing its Total Audience Measurement product with programmers, received a major setback when NBCUniversal chairman of advertising sales and client partnerships Linda Yaccarino said in a letter that was made public that TAM wasn’t ready to be released and that it did more harm than good.
That would have seemed to open a big door to rival measurement companies. But so far, that hasn’t happened.
“They [comScore] are in a competitive, fast-paced market. You can’t take a vacation from that,” Eagan said. “My concern is that they get behind.”
FEW GOOD COMEBACK STORIES
There is a long list of media companies that have been delisted from NASDAQ. Some, like Charter Communications, which was delisted in March 2009, have come back even stronger than ever. After emerging from bankruptcy in November 2009, Charter, with a clean balance sheet and a new ability to invest in the business, returned to the NASDAQ on Sept. 14, 2010, opening at $38 per share. More than six years later, after major investments by cable legend John Malone and its acquisition of Time Warner Cable and Bright House Networks last year, Charter stock closed at $325.73 per share on Feb. 8.
But that’s the exception. More often than not, media companies that have fallen off the NASDAQ have either been acquired by other companies at bargain prices — like Gemstar-TV Guide International (delisted in 2002 and sold to MacroVision — now TiVo — in 2008) and Terayon Communication System (delisted in 2006 and sold to Motorola in 2007) — or disappeared altogether.
Eagan said comScore still has a lot of cash, so bankruptcy isn’t a concern at the moment. But he added that other companies are beginning to encroach on the space — private company Moat has made inroads with its Attention Analytics products and Group M and industry group the Video Advertising Bureau have announced plans to develop their own cross-measurement metric.
“My biggest concern is if they continue to lose talented individuals,” Eagan said. “But can they come back? Yes, I believe they can.”
CHART: Delisted A-Listers
Several media stocks have been delisted from the NASDAQ stock exchange over the years, but few have managed to work their way back to favor.
Company Date Delisted Outcome
Charter Communications. . . . . . . . . . March 2009 . . . . . . . . . . . . . . .. . . . Filed for bankruptcy in 2009;
returned to NASDAQ in 2010;
buys Time Warner Cable in 2015
Terayon Communication Systems. . . . . . April 2006 . . . . . . . . . . . . . . .. .. . . Sold to Motorola in 2007
Gemstar-TV Guide International. . . . . . . . . . 2002 . . . . . . . . . . . . . . . . . . . . Sold to MacroVision (now TiVo) in 2008
Classic Communications. . . . . . . . . . . . . December 2001 . . . . . . . . . . . . . . . Reached management
agreement with Cequel III in 2003
SOURCE : Published reports
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