The holding company business has always rewarded patience, or at least the appearance of it, and lately the shareholders of WPP and S4 Capital have been asked to demonstrate quite a lot of both.
Now there are signs — tentative ones, to be sure, but signs nonetheless — that the long turnaround efforts at the two companies may be gaining traction. Following their most recent earnings calls, both WPP and S4 Capital saw their stock prices rise by 26 percent, a surge that might seem counterintuitive given that both companies actually reported revenue declines for the period.
The enthusiasm, such as it is, appears to stem not from what the numbers said but from what they did not say. Investors interpreted the slowing pace of those declines as evidence that the worst may have passed (a logic that makes perfect sense on Wall Street, where the second derivative is often more interesting than the first).
It remains early days. Publicis Groupe continues to lead the holding company field by most conventional measures, having posted organic revenue growth of 4.8 percent in its most recent quarter. That performance has made the French company the envy of its peers — a position WPP itself occupied not so many years ago, before a combination of client losses, leadership changes, and the general unpleasantness of 2020 sent it into a prolonged slump.
S4 Capital, the digital-first venture assembled by Sir Martin Sorrell after his departure from WPP in 2018, has faced its own challenges, including profit warnings and executive reshuffling that tested the patience of investors who had bet on Mr. Sorrell's ability to build a new kind of holding company.
Whether the recent stock movements represent genuine inflection points or merely a pause in the descent remains to be seen. The holding company hierarchy has shifted before, sometimes slowly and sometimes all at once.
Original story published in adweek.com: "ADWEEK Agencies Advantage: Turnaround Signs at WPP and S4 Could Tip the Holdco Power Scales"