Sky Television shares - which touched $6 as recently as 2015 - fell 3 per cent today to a new low of 65c, for a market cap of $283m.
• Sky says it will merge Lightbox with Neon
The slump means NZ Rugby's 5 per cent stake in the pay-TV broadcaster, which was worth $20.06m when it was handed over in mid-October as part-payment for the renewed Sanzar deal, is now valued at $14.2m.
In October, the deal was pitched as an "innovative" element of the five-year deal (which the Herald understands was worth some $400m in total) though in reality shares are often used to top-up a purchase price. Right now, NZ Rugby might be wishing it opted for the whole payment in cash.
NZ Rugby is not your average shareholder. It's holding came with several restrictions, including that the union must hold its stake for at least two years, and that if it does decide to sell once its restricted term expires, it must give Sky at least 10 days' notice.
But like all investors, it will be hoping Sky's slump is temporary.
There are bulls, including Fat Prophets research head Greg Smith, who believe Sky is over-sold. All of the bad news is factored in, and then some, for the still-profitable (if now dividend-less) company. With top-tier rugby safely tied up for the next five years, he sees a rebound to $2 in the next 12 to 18 months.
Others are more wary, including Jarden's Arie Dekker (who has a neutral rating and a $1.01 12-month price target).
In a note to clients this morning, he saw Spark's sale of Lightbox to Sky "as a likely precursor to Spark's eventual exit from Sport as well."
A Spark withdrawal from sport would of course be very welcome news at Sky.
Spark itself has given no indication of throwing in the towel. In fact, post-Rugby World Cup it added domestic cricket to its roster. And even if the telco does exit stage left, other threats lurk, including Amazon, which has recently grabbed a portion of top-tier tennis and football rights in the UK. And then there are new direct-to-the-consumer threats in entertainment, including Disney+, Apple TV+ and the looming HBO Max.
Jarden sees the market, so at sea right now, stabilising in around five years, and a possible role for Sky at the end of it as an aggregator of top sports content.
But the wealth manager adds that investors should focus less on what Sky could look like in five years time, and more on how "Sky will get through the next few years".
It says Sky faces the prospect of not generating enough cash to support the business and may struggle to access additional finance as its $200 million bank facility, which is already drawn to $90 million, shrinks to $150 million in July 2021.
Jarden will be looking for some colour from Sky on how it can avoid this negative cash flow scenario when it presents its half-year result on Wednesday (CEO Martin Stewart has already warned that both revenue and profit will be down for 2020 as Sky continues to invest in streaming).
Sky had positive news, of sorts, at its full-year result, as it reported that, for the first time, streaming subs rose faster than satellite subs feel, allowing it to eke out a 1 per cent gain in total subscribers - a welcome reversal after several years of losses (although the kicker was that streaming subs pay less than those who use decoders, and average revenue per user per month sunk from $77.73 to $74.84 overall).
Investors will be looking for the increase in streaming subs to continue in the new financial year.
With Sky's aggressive promotions (its Sky Sport Now streaming service has recently been pushed with a $5 deal) and the onboarding of 130,768 Lightbox subscribers from Spark (who will be merged into Sky's Neon streaming service), it's a done deal that streaming sub numbers will rise.
But it's also a near-certainty (with an unknown amount of money having flowed to Spark to encourage it to part with Lightbox) that its customer acquisition costs will also increase.
We might get more of an idea on Sky's ability to suck up short-term pain next Wednesday.
Spark shares were up 0.76 per cent to $4.64 in late trading for a market cap of $8.5b.