This analysis was first published in SvD Näringsliv, in Swedish, on December 1st, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Small investors are being wiped out as major shareholders step in to rescue Viaplay with new money. And one recently arrived owner is conspicuously absent from the new shareholder list: Norwegian media group Schibsted.

More than six hours after the deadline, Viaplay’s latest quarterly report finally arrived. The figures from the business, however, were not the interesting part. Losing just over half a billion kronor in a quarter actually beat market expectations.

That says something about the state Viaplay finds itself in.

The focus was on the company’s future financing. A comprehensive recapitalisation plan was presented on Friday morning. Four billion kronor is to be injected by major shareholders including Canal+ and PPF through a directed share issue of 3.1 billion kronor and a rights issue of 0.9 billion kronor, in which Nordea Asset Management will take its share. The company’s debts are also to be restructured and written down by two billion kronor, a quarter of which will be converted into new shares.

It might sound encouraging. But as a shareholder, it is anything but. On Friday morning, Viaplay’s share price collapsed by more than 80 percent instantly.

The subscription price for the new shares is one kronor. On Thursday, Viaplay’s share price closed at 23.68 kronor. In January this year it was above 200 kronor.

The dilution for existing shareholders is described as “substantial” in Viaplay’s press release. “Brutal” would be a more fitting word. The company’s value is essentially wiped out by the transaction. Shareholders who are unable to participate in the new plans will lose virtually their entire investment.

The other striking thing is who is not mentioned in any of Friday morning’s documents or presentations: Norwegian media group Schibsted, which also owns SvD, Aftonbladet, and Blocket.

In September, Schibsted bought 10.1 percent of Viaplay — described at the time as “a financial investment” by IR director Jann-Boje Meinecke. It sounded like a strange explanation then. It sounds stranger still today. Schibsted is not a traditional financial investor. More likely, they intended to buy out the Nordic operations from Viaplay and break the company up in its current form. But for this to happen, difficult negotiations with the company’s other major shareholders and lenders were required.

From Schibsted’s perspective, everything points to those negotiations having failed. In September they held eight million shares in Viaplay. According to E24, these cost around 380 million kronor. After the planned recapitalisation, the stake will be worth around 8 million kronor. A neat loss of around 98 percent. Not ideal for something described as “a financial investment.”

Instead, it is French Canal+ that takes the driver’s seat. The British operations were sold back to the previous owners the day before the report, and Viaplay will now focus entirely on the Nordics and the Netherlands.

The plan of a tighter geographical focus sounds sensible, but comes far too late. Expensive sports rights, a failed internationalisation, fierce international competition in the streaming market, and pressure from both high interest rates and inflation have made this an extremely tough year for Viaplay. The problems did not begin in January — they had been building for several years through extravagant investments that never paid off.

Simon Duffy, acting chairman of Viaplay, says the following in a press release: “It is unfortunately a consequence of too many of the investments that the Group previously made not having been realised as planned, as several of the business models on which they were based turned out to be optimistic.”

That optimism feels distant today. And expensive. Every small investor lured in by the promise of the streaming market’s rise will be essentially wiped out by today’s plan. When the dust settles, it would be appropriate to look at who was responsible for this remarkable destruction of value in such a short time.