Shares in WW International, the parent company of Weight Watchers, plunged by over 15% after former top shareholder Artal Group sold its remaining stake in the company. According to market sources, a block of about 14.8 million WW shares was being marketed at about a 13% discount, leading to the fall in share prices. The shares had more than doubled in value this year, partly driven by expectations that the firm’s entry into the obesity drug business would help drive a turnaround. However, the company is now grappling with a severe decline in subscribers at its weight management program.
Weight Watchers, which once boasted media mogul Oprah Winfrey among its top shareholders, reported $211 million (€193 million) in first-quarter revenue last week, an 18% drop from a year earlier, while its net loss widened to $118.7 million from $8.2 million. The company’s pivot into the drug business is against its historic culture of eating right and losing weight slowly and progressively. Thomas Hayes, chairman and managing member of Great Hill Capital, said, “It just seems to be a secularly declining business and the pivot into prescription medication seems like a Hail Mary pass which may or may not get caught. They are trying to find themselves, and investors are getting tired of waiting for them to figure out who they are.”
Investment manager Artal, which bought Weight Watchers from then HJ Heinz in 1999 for $735 million and maintained a controlling interest from its initial sale of shares in 2001 through 2018, held only an 18.8% stake in the company at the end of last year, according to Refinitiv data. Artal Group Chief Executive Ray Debbane said in a press statement, “We have been privileged to have overseen and participated in the company’s development over the past 24 years, which is one of the longest holdings in our 38-year history,” adding that he has full confidence in WW’s current leadership team as they evolve the business.
The company’s acquisition of Sequence, a telehealth provider that will help the company tap into the growing market for new obesity drugs, led to a surge in shares last month. However, since then, the company has struggled to hold onto gains. The pivot into the drug business may be the company’s attempt to diversify its revenue streams and turn around its declining business.
Weight Watchers’ decline in subscribers can be attributed to the rise of new digital health and wellness platforms that offer personalized nutrition and fitness plans. The company’s traditional model of in-person meetings and a focus on calorie counting is no longer as attractive to consumers. The pandemic has also accelerated the shift to digital health platforms. The company’s leadership team must now find a way to adapt to changing consumer preferences and compete with new digital platforms.
In conclusion, the sale of Artal Group’s remaining stake in WW International has led to a significant drop in share prices. The company’s pivot into the drug business has not been well received by investors, who are growing impatient with the company’s declining business. WW’s leadership team must find a way to adapt to changing consumer preferences and compete with new digital health platforms.