Comcast, one of the investors in the revamped Showmax launched in February, has a put option which will value its 30% stake at R2.7 billion in 2031, meaning Showmax's whole valuation will be R9 billion. A put option is a contract that gives the buyer (Comcast) the right, but not the obligation, to sell the underlying security (Showmax stake) at a specified price (R2.7 billion) and at a predetermined date (7 years after Showmax launch i.e. 2031).
The valuation is Showmax’s about 5.1x the last valuation of the streaming platform when Multichoice sold the 30% stake to NBC Universal for R536 million, which would have valued the streamer at around R1.8 billion. Doing the math means Showmax's valuation would have increased by 374% by 2031.
But even if Showmax reaches that valuation by 2031, Comcast still reserves the right to ask for an even higher amount for the stake. In short, R9 billion is the least amount of money Comcast will receive for its stake in 2031 if they decide to sell it to Multichoice in 2031. In a similar case of a put option, Comcast is currently embroiled in a back-and-forth with Disney about the value of its put option on Hulu which it says is higher than what it predicted when it bought the put option five years ago.
Showmax’s performance according to Multichoice’s latest results shows a lot of work to be done until that valuation can be justified, meaning a lot of investment still has to go in from both Multichoice and Comcast.. Despite a 22% revenue growth to R1.3 billion ($71 million), the streamer recorded a trading loss of R2.6 billion ($142 million), mainly driven by platform costs. Multichoice signed a 7-year contract to host Showmax on the Peacock platform. At R247 million ($13 million) a year, Multichoice will shell out a total of R1.7 billion ($93 million) to be paid in advance.
When announcing the relaunch of Showmax in April last year, Multichoice said it expected the platform to achieve trading profit breakeven by at least 2027. Comcast’s put option puts even more pressure on the company to achieve those targets.