Weinstein scandal sparks valuation questions

BVWireIssue #181-3
October 18, 2017

The incredible scandal out of Hollywood is reverberating not only throughout Tinsel Town but everywhere. On top of the revelations of egregious conduct, an exclusive report in Variety reveals that The Weinstein Co. may be forced into bankruptcy over this—a stunning collapse of a once-powerful firm. This brings up a few interesting valuation questions.

Ticking time bomb: The behavior of Weinstein has been an “open secret” in the industry for many years. If you’re valuing a company and doing industry research, should you expect to uncover this? To what extent do you take this into account in your valuation? Years ago, the probability of exposure was different than it is now, in the wake of similar scandals such as the Fox News disaster and the evolving Amazon matter. There’s a different environment now, and a time bomb such as this is ticking louder than ever. How do you quantify it? Are you exposed to repercussions for letting the cat out of the bag? If a company is caught up in a marital dissolution case that predates a big scandal, what do you do about subsequent events? The company was flying high at the time of divorce but has since crashed and burned in a short period. Should you have foreseen any of this trouble?

How do you handle scandals, potential scandals, or similar matters in your valuations? Let us know!

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