Athletic, Axios talking merger?

Supposedly 1.2 million subscribers, up to $80 million in revenue this year and growing that revenue at a decent clip -- projecting another jump in revenues next year. Still unprofitable, currently.

We can't see their books, so I suppose they aren't generating that revenue. But it's not like it's a crazy number, and it would make zero sense to let those numbers hang out there when any potential buyer would be able to see that it's not true. So why exactly would you doubt it?

 

On a potential sale, the question is whether a business that is doing that little in sales (and is still unprofitable) commands the massive valuation they are looking for.

In normal times, not a chance, even if you did buy the kind of growth projections they are selling. In the cheapest money environment in recorded history, who knows? Prices are very distorted.

 

If it was an old business (for example, a legacy newspaper) that had once been profitable and was on the decline, mired in debt, and dying slowly. ... the type of buyer it would attract would be a vulture investor looking to buy it cheaply and insulate itself from the debt. ... and then aggressively cut costs to extract as much from the soon-to-be corpse as it can before it dies.

That is not this business. People on this thread have been conditioned by how hard newspapers have been hit to think this is that story. It's not.

This is being viewed as a start-up business that is growing and has a lot of potenial. Not a dying business. The investment it has attracted already has valued it extremely richly. ... not as a dying newspaper. ... which means those investors anticipate the online / subscription model combined with the product they are offering being able to grow it aggresively and make it very profitable.

That may or may not happen the way they project. But that has still been the expectation here. The kind of money someone bought in at just 20 months ago, and the kind of money they are looking for now, value this business very richly. ... 10 times sales, when a digital media business used to be valued at maybe a third of that. There are reasons for why there is so much money chasing such expensive valuations, but regardless of that, it's happening.

Nobody is going to spend that kind of money to gut a business. You gut a business that you are able to buy for a song, hoping to extract some value from it. You don't pay a fortune for something you think you need to gut. It's like suggesting that someone would buy something they think is the hope diamond so they can cut it up into little pieces. Anyone buying this won't be focused on the fact that it's not profitable yet (even if they maybe should be more focused on that). They will see a start up that is still on its way to explosive growth and profitability.

That isn't me suggesting that is going to happen for the Athletic. Or that they will be successful finding a buyer at that price. Time will tell. But this business has been viewed as a high-potential start-up in its growth phase. The pressure to turn profitable while growing like gangbusters will be there at some point, but it's not there yet.

 

On their trailing revenues from reports, they are trying to get around 10 times sales. That is insanely high for a digital media company.

But this has been their story even as they were selling stakes via venture capital funding rounds. A nosebleed valuation. And people willing to buy a piece at a higher and higher price.

It definitely shuts them off to anyone value conscious, but money has never been cheaper in recorded history than it is currently. ... boatloads of freshly created dollars for which safety offers negative real yields. As a result, it has pushed up prices for riskier and riskier things as people chase the yield they are being robbed of. And that cause and effect has created panic-buying frenzies. I personally think we are in a multidecade monetary-induced bubble that people will look back on later and shake their heads about. I also think most of that money that has bought overvalued things (some downright ridiculous, not even potentially viable businesses like this one) already knows what is coming, but they are counting on the greater fool theory continuing to allow them to offload their overpriced assets to someone else at an even higher price.

While the liquidity is still being pumped in the way it currently is? It has paid handsomely to over value yourself, as you put it. It just takes one entity willing to meet the price.