Everything you don’t actually need to know about the economics of Succession
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Spoiler alert: This article contains major spoilers up to season 4, episode 4 of Succession. If you do not want the show spoiled, go read this excellent piece about accounting fraud instead.
Succession is a show about a business. For three-and-a-bit seasons, the saga of Waystar Royco — a storied but creaking media giant led by ageing mogul Logan Roy and his squabbling spawn — has entranced audiences with familial betrayal, corporate intrigue, withering put-downs and Cousin Greg.
Despite the sound, fury and personal drama, in a strictly business sense . . . not much has actually happened. Still, it has got a bit confusing, and even seasoned financial analysts or FT columnists could be forgiven for losing track of things. So FT Alphaville sat down for a fevered quasi-binge of the show and tried to make sense of Succession’s financial plotline(s).
We’re gonna try to answer some key questions:
— What is Waystar worth and how is it run?
— Who owns Waystar shares?
— What is Waystar’s share price and why does it matter?
— How rich are the Roy kids?
A note on methodology + plot catch-up
Succession, obviously, never sits the audience down to carefully talk them through its financial engineering. Instead, nuggets of detail about how everything works are spread thinly throughout the series.
Thankfully, we also got a big help: the kindly folks over at Faber sent us PDFs of the scripts for the first three seasons, set to be published next month, massively speeding up our search. Where there’s a divergence, we’ve quoted the show instead of the scripts.
If you need a quick recap, only three big financial things actually happened in Succession before Logan Roy’s death this season.
Kendall shat the bed by selling a large but undisclosed chunk of Waystar to “friend” Stewy Hosseini for $4bn. (S1E3)
A truce was reached in which would-be hostile raiders Stewy and Sandy Furness got a bunch of extra Waystar board seats. (S3E5)
Logan attempted to buy growth-y streaming platform GoJo, run by Lukas Matsson, but instead GoJo tries to buy Waystar. How the turntables . . . (S3E9)
Everything else was basically irrelevant and a waste of your time, sorry.
Part 1: Hey now, you’re a Waystar
In FTAV’s opinion, Waystar Royco is the show’s real main character. Waystar is a large media conglomerate that is publicly listed on the New York Stock Exchange. Built up by Logan over decades, it chiefly comprises entertainment, news and amusement park divisions. But what is Waystar worth and how is it run?
Former Alphavillain Jamie Powell explored the company’s valuation in late 2021, as season 3 unravelled. A couple of key bits from his piece:
During a walk through the dunes, [key investor Josh] Aaronson complains he’s lost $350mn, or 10 per cent, on his 4 per cent position in the company thanks to their internecine squabbling . . . that gets you to a market capitalisation of $78.8bn. Not including debt. (Which we know from earlier episodes exists in size; this is legacy media after all) . . .
Run the numbers with the $80bn valuation, and assuming no premium on the buyout offer (a big if), and Kendall owns about 2.5 per cent of Waystar Royco.
So, a valuation of around $80bn, which was closer to $90bn when Aaronson bought in. How is it structured? From a plot perspective, there are three tiers of control that matter:
The shareholders: People who own voting shares in Waystar.
The board: Executives who can make votes on certain decisions.
The holding company: The vehicle through which the Logan family shares are held.
The show repeatedly uses votes within these tiers to generate dramatic climaxes — each a finely balanced contest that will steer Waystar’s fate:
The hostile takeover attempt hinges on a Waystar shareholder vote
Insignificant in a sense because it failed, Kendall’s attempt to oust Logan in season 1 hinges on a board vote
The kids’ failed attempt to stop the GoJo takeover at the end of season three hinges on a holding company vote
The pressure on Logan to go back to Matsson early in season four hinges on a board vote.
Let’s look at the board and holdco quickly.
The 11-member board is the battleground for Kendall’s doomed S1 attempt to oust Logan, and the tool Stewy/Sandy/Sandi want to use to push Logan back to negotiating with Matsson. In season one, its delicately balanced composition creates a high-stakes drama:
. . . but from late S3 the four seats held by the activists plus those held by the children (acting as a bloc) represent a majority, making a board vote outcome more predictable. Hence why, in the latest episode, they could easily push through the vote for Kendall and Roman to become co-CEOs.
The holding company
The Roy family runs a holding company — a vehicle used to control interests in other companies. In this case, the company appears to be called Royco Holdings, and has a subsidiary called Royco Holdings Acquisitions Corp that makes share purchases. Royco Holdings may control the Roy family stake OR control some special class of shares with additional voting rights that offer some level of control over the whole company.
The holding company emerges as a key plot point at the end of season three, as the kids are looking for ways to stop Logan selling to GoJo.
I just don’t think we go in aggressive. I mean can we even actually stop him?
Yes. A change of control needs a supermajority in the holding company. Mom got us that in the divorce. He’d need us on board.
The suggestion here is that holding company has a very small number of powerful votes. It’s quite possible, given how much Succession draws from the travails of Rupert Murdoch and his clan, that the writers took some inspiration from News Corp’s arrangements. From a recent Vanity Fair piece on the topic:
Lachlan [Murdoch]’s future will be decided by his siblings, all of whom sit on the board of the trust that controls [News Corp] through a special class of stock. According to sources briefed on the trust’s governance, Murdoch has four votes while Elisabeth, Lachlan, James, and Prudence, Murdoch’s daughter from his first marriage, each have one. Murdoch’s daughters Chloe and Grace from his third marriage, to Wendi Deng, have a financial stake but no voting rights. After Murdoch’s death, his votes will be distributed equally among the four eldest children, the source said.
A supermajority usually requires a two-thirds or three-fifths majority, so plausibly Logan has four votes, and the kids have something like three held through Lady Caroline Collingwood (their estranged mother and Logan’s ex-wife). The specifics don’t hugely matter (baby Roys may disagree).
Before they can do this, however, “Mom” gives up the voting shares — possibly in exchange for the Belgravia flat coveted by her new husband — allowing Logan to push ahead with the deal.
Part 2: Owned
. . . and then there are the shareholders. Based on what is made explicit in the show, these are Waystar’s significant voting shareholders following the S1E3 stake sale to Stewy:
Adding up all these known stakes brings us to just 47 per cent — but several other big players are also established. Splitting them along S3E5’s proxy vote battle lines:
We’re told the family holds 36 per cent of Waystar. Jamie’s diligent research suggested Kendall’s stake was about 2.5 per cent midway through the third season assuming no price premium — his siblings (including half-brother Connor Roy) would likely hold a similar amount, although a lot of this might depend on if they have sold stock to fund spending elsewhere. Kendall and Connor both have sizeable real estate investments, and Kendall is a divorced dad, so it’s plausible they hold less stock.
That perhaps left Logan with roughly a quarter of all shares.
The barely-mentioned Jack ‘the Ulsterman’ — who seems to variously be located in the UK (Cheltenham and racing are both mentioned) and Boston — has a 4 per cent holding.
The Pierce pursuit has played badly in some quarters. Jack the Ulsterman is wavering.
Four per cent is he? We can have a conversation.
There’s also a reference made in season three to “Park”, another “top tier” investor seemingly loyal to Logan, but their stake size is not discussed.
Then there’s the opposition. The core of this group is Maesbury Capital, a private equity vehicle represented by Stewy but ultimately controlled but Sandy and his daughter Sandi. We do not know how much Maesbury Capital owns, only that Stewy was seemingly not invested in Waystar at the start of season one:
So, Stewy, listen, I could do with a read, from someone without a dog in the fight?
. . . and then bought a chunky stake for $4bn. Based on an $80bn Waystar valuation, this should be 5 per cent of the company. With the shares tanking at that time, it may have been more like 8 per cent — but Kendall’s desperation means he might have given away much more. Whatever they got seems to have come out of the Roy family’s stake.
We got an added clue to Maesbury’s stake size in the latest episode (S4E4). As the board discusses Logan’s possible endorsement of Kendall as his successor, Frank says the controversial document is “as far as we can tell from four years ago or something”. He adds:
The family no longer has majority control of Waystar, so any such suggestions are non-binding.
This is juicy! Given early Season 4 is set on the cusp of a US presidential election, we can presume it is set in late 2020 (sans pandemic). This indicates the document is from around 2016.
Now, we know Kendall sold Stewy a stake during the first season — at some point in autumn 2017 (more on that later) — that left the family with 36 per cent. If the family had majority control when Logan wrote the document, would suggest that the family controlled at least 51 per cent as recently as 2016. That then suggests that Kendall sold Stewy at least 15 per cent for $4bn. A terrible decision!
Maesbury is seemingly backed up by “the Canadians”, a pension fund:
I got the call. Canadians are in.
Yeah, listen. You know the Canadians. Yves et cetera?
Uh-huh, what, the pension-fund guys?
Yeah. What do they think of me, Frank?
We know next to nothing about them, but their stake and those of any other unmentioned allies, combined with Maesbury’s, must be similar to the family’s or higher.
Finally, there’s Aaronson’s 4 per cent.
The vote’s on a razor’s edge, we need his 4 per cent
Adding it all up, it’s somewhere in the mid-high forties for the family, and seemingly similar for the activists. Which brings us to . . .
Then there’s the others. Season three episode 5, Retired Janitors of Idaho, is so named for the assorted pension plan investors who hold Waystar’s fate in their hands.
Okay well it’s down to the vote. We’re climbing into the vote boat.
Great. ‘Voting’. Let’s throw it open to the fucking retired janitors of Idaho.
We’re gonna lose the fucking company. Are we going to lose the fucking company today?
MAYA [proxy solicitor]
If Josh Aaronson is against, it is hard to see how you win with a clear margin.
Also alluded to are Glass Lewis and ISS — real-world groups who advise companies with extensive holdings on how to use their proxy votes at annual general meetings of shareholders.
An added unknown is Ewan Roy — Logan’s brother and Greg’s grandfather — who holds a board seat but may or may not have a stake. (During an argument in S1E5, Ewan tells Logan “I got a thousand acres, you got the rest of the world”, which suggests he might have never inherited shares).
As it turns out, no vote happens, but this shareholding dynamic remains in place at the show’s current stage. How disgruntled should investors be, anyway?
Part 3: Oversharers
At three points in the show, we’ve been offered clear insight into its fluctuating share price.
Season 1, Episode 3 (Lifeboats)
When Kendall is forced to handle the fallout from his father collapsing the show kindly treats us to an extremely clear shot of his Bloomberg terminal — fancy financial software running on a regular computer — which provides us with tons of juicy information. 😋
Kendall is screening the share price of Waystar Royco, which is tanking as news of Logan’s collapse hits the markets. Let’s break it down.
1) The security is Waystar US Equity, aka “Waystar Corp.”, and its ticker is WAYA US, meaning it is presumably listed in the New York Stock Exchange. The second A in WAYA suggests that this is the company’s Class A shares. This is implies there are Class B shares, which may carry different voting rights, but should be similarly priced. For example, here’s the Class A vs Class B shares of News Corp, a business that, as previously mentioned, bears certain similarities to Waystar:
In News Corp’s case, Class B (the white lines above) carry slightly more voting rights, meaning Class A is slightly cheaper.
Looking further along the top bar, we can see it’s 10:01am, that 4,263,088 WAYA shares have changed hands, that it opened at $149.1 per share and seems to have just hit an intraday low of $140.54.
The total value traded of the security that day (ie the value of each trade totalled up) is about $37.5bn, which looks like a mistake. Looking at the number of shares traded and assuming an average price of, say, $145, about $600mn seems more appropriate. Sorry.
2) The actual graph area shows the drop between Friday 20th October 2017 and Monday 23 October 2017 as markets digest news of Logan’s condition. That’s down 10.1 per cent on the day, implying a closing share price of $156.3 on Friday. In a sense, this can be seen as Waystar’s natural price pre, uh, succession crisis (although the share prices of large companies are always on the move, for various reasons).
Later in the episode, we learn the price has fallen through $130, implying a drop of at least 16.8p per cent And, later in the season, the activists (via Kendall) offer Logan $140 per share for the company.
Season 3, Episode 7 (Too Much Birthday)
In this episode, Logan sends Kendall a birthday card that says, succinctly, “cash out and fuck off”. In it is a term sheet that shows Logan offering Kendall just over $2bn in exchange for said fucking off.
We’ve mentioned the implications of this regarding stake sizes above, but what might be worth dwelling upon here are the price and volume.
So Kendall owns nearly 13m shares, and the company’s share price at that moment (assuming no premium to sweeten the offer) is about $156.2, having seemingly recovered strongly since late season 1.
Does the maths check out? On the price, yes (ish): 12,904,663 shares x $156.2 per share makes $2,015,708,361 — a few hundreds dollars are lost in the wash.
On volume . . . assuming Kendall’s stake is indeed 2.5 per cent at this point (following Jamie’s calculations), that suggests there are 516,186,520 Class A common shares floated. Going back to Kendall’s Bloomberg terminal, this makes 4.26m trades in that panicked day’s first half-hour of trading seem . . . decently plausible? News Corp has a float of about 380m shares, and averages volume of 2-3m trades per day.
Season 4, Episode 3 (Connor’s Wedding)
As the children wait for Logan’s body to be brought off a plane, Roman checks Waystar’s stock price on an app on his phone. It’s once again tanking.
The Wall Street Journal has done an interesting vibes-y piece about this here. Good bit:
Stock prices rise nearly half the time when a CEO dies unexpectedly, according to a study of 240 U.S. public companies from 1950 to 2009 by the University of Notre Dame and the University of Georgia. Not surprisingly, share prices surge when a corporate leader seen as ineffective dies, and drop when a CEO seen as successful dies, according to the 2016 research, a result co-author Craig Crossland called “somewhat macabre.”
We’re gonna look at the actual number on the screen. Here’s our best attempt at taking a photo of the phone:
OK, the Waystar Corp. of S1E3 now seems to be Waystar Royco Inc/WAY:NYSE, which plausibly could be a security representing a different class of shares. The NYSE bit at least confirms it’s New York-listed.
Shares were at a high of $182.46 earlier in the day, which is the highest we’ve seen them, and a chunky recovery from the first season’s lows — likely a result of the shares rallying to the premium price Matsson was expected to pay to take over.
Regardless, Logxit has sent Waystar shares down to $145.12 according to the app. The previous close was $181.22 so we make that 19.9 per cent off, but the app looks like it says 20.11 per cent down. Meh.
The volume of shares traded was just 2.07m. That seems very low given the size of the drop and magnitude of the news, but may reflect this being a less plentiful share class. Besides, Matsson already put his cards on the table about Logan:
. . . his death would clear space, with due respect.
In the very bottom-right (not really visible in the picture above), there’s a field which says market cap. The number here is something like $7X.71bn, with the second digit possibly a 5 or 9. And, for what it’s worth, $75.71bn/$145.1 gives a total share count of 521,778,084, which is barely a per cent off the total we estimated earlier based on the term sheet given to Kendall. GET IN.
That’s roughly the kind of ballpark we’d expect for the company’s overall valuation, although if it’s at that level when shares are at $145.1 it suggests Kendall was indeed being offered a decent premium for his stake at $156.2 in S3E5.
Which brings us on to our final question . . .
Part 4: How much are the lil Roys worth?
First key thing:
. . . for one thing, our inheritance is all in stock
Given this detail, a key unknown is how disbursements from Logan’s stake will work. But we know the kids are already pretty rich. How rich, exactly?
Kendall is a problem. Succession viewers may recall that season 3’s attempted $2bn buyout isn’t the first time someone offered to buy him out of the company. In season 1, at Tom Wambsgans’ bachelor party, Stewy offers Kendall a way out:
How would you like to be all the way out? Half a bil for your share of Waystar.
Is this for real?
Yeah man, I’m feeling fucking generous, that’s all
It’s not uninteresting
There are two obvious options here:
1) This is a fairly large continuity error
2) Stewy is referring, quite unclearly perhaps, to buying out Kendall’s stake for its market value AND dumping half a yard of sweetener on top?
We have to assume it’s the latter, or that the writers decided the stakes needed to be higher for Kendall in season 3. Either way, early season four somewhat implies that the kids’ share fortunes stand in the billions, with stakes of about 2.5 per cent apiece . ..
After the GoJo sale we’ll have 2, 3 bill, so that’s our nut.
Assuming the second, larger Kendall payout figure is correct, and that the kids hold roughly the same amount of stock (which, as mentioned earlier, is unlikely), it means they were on course to get about $2.3bn apiece from the sale, based on the share price before Logan died.
His death has knocked that to a mere $1.9bn . . . but they might end up with much more once Logan’s stake is carved up, given that the patriarch presumably still owns about 26 per cent of Waystar’s shares personally (the family’s 36 per cent overall stake minus the ca 2.5 per cent chunks owned by each of the four children).
So, all cleared up! Oh hang on, Waystar chief financial officer Karl Muller is there to offer some extra clarity:
If Waystar is sold, they have the right to liquidate their five per cents.
Fuck’s sake, we give up.