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Although Harry Potter is hot property right now, his publishing company has failed to cash in, investors say.
Potter publisher Scholastic faces an exodus of shareholders if the company doesn't consider putting itself on the market.
Investors, including Mark Boyar of Boyar Asset Management, say the New York-based publisher should be sold because chief executive officer Richard Robinson - who has run Scholastic since 1975 - hasn't used the windfall from Harry Potter, the biggest hit in books in the past decade, to build successful new businesses.
The shares, which last closed at US$33.80, - would be more than $50 each, or 48 per cent above their present price, if the company were to sell itself, Boyar and Stifel Nicolaus analyst Drew Crum said.
"This is a very, very valuable business, and it would be worth a lot more to a potential buyer," said Boyar, president of the New York-based firm, which owned 200,000 Scholastic shares as of March. Last week, the company reported fourth-quarter profit of $40.4 million, or 93 cents a share, missing analysts' average estimate.
"We have no intention of selling the company, and we don't believe our investors need us to sell the company to realise value," said Robinson, whose father, Maurice, founded Scholastic in 1920.
Harry Potter, the biggest children's book series ever published, has sold more than 325 million copies worldwide since 1997. It holds three slots among the 10 best-selling books in the United States since 2001, the year the first movie was released.
Scholastic bought the US rights from London-based Bloomsbury Publishing in 1997.
Both companies, among the few publicly held book publishers that remain independent, are family-run. Each is faulted by investors for failing to use the revenue from Harry Potter books to develop new franchises.
The series brought in US$800 million in revenue for Scholastic from the first title's US publication in September 1998 through the financial year that ended this May, Crum said.
That amounts to 4.7 per cent of sales over nine financial years.
Crum predicted that Scholastic would reap another $225 million this financial year, or 9.4 per cent of $2.4 billion in sales.
Scholastic plans to print a record 12 million copies of the final entry in the series, Harry Potter and the Deathly Hallows.
Crum said that while sales would decrease over time, Scholastic would still get about US$10 million to US$15 million a year from Harry Potter for the next three years, driven by special editions, two more movies and paperback copies.
- BLOOMBERG
