UK ad giant WPP has said it will “defend itself vigorously” against a slew of lawsuits in the US led by experienced class action specialist Levi & Korsinsky and filed in New York. The firm added, correctly, that “no court has ruled that we have violated any laws.”
The US legal action follows a profit warning in the summer which saw WPP shares plummet 18.8% and CEO Mark Read announce his departure. He’s since been succeeded by long-serving WPP non-executive directive Cindy Rose, a former Microsoft executive.
Levi & Korsinsky’s case involves sharply declining fortunes at WPP Media. The final straw for Read was losing Mars’ $1.7bn global media account to French HQ’d group Publicis which, in a polar opposite of WPP’s recent fortunes, has seen its share price increase almost 200% in five years, giving a market value of around £19bn and taking on WPP’s former title of world’s biggest ad firm by revenue.
Conversely, WPP has seen its market capitalisation plummet from a £25bn high eight years ago, when it was the world’s largest marketing services company, to around £4m today, along with attendant profit warnings and the danger of dropping out of the FTSE 100, which it has been a member of for three decades.
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With WPP shares opening down this morning, valuing it at £3.76bn, media analyst Alex DeGroote told The Guardian that the FTSE exit threat, and possibly worse, is more real than ever: “Another profit warning could push it out and WPP is up against it,” he said. “I was in the room with [founder Martin] Sorrell when the business entered the FTSE 100 in 1998 – the jubilation. The situation WPP finds itself in now is almost unthinkable. WPP is extremely vulnerable, it is [potentially] facing a takeover or breakup.”
The crux of the current US court case lies in whether or not WPP, which employs around 100,000 people, including at its vast Manchester campus, and has worked with big name clients including Ford and Coca Cola – a contract it also lost to Publicis in March of this year – genuinely believed its revenue would decline by around 2% over the course of the year – as it had forecast – or it was actually aware that worse news was coming down the line.
Whichever is the case, it’s a distraction new CEO Rose, who has also worked at Virgin Media, Vodafone and Disney, can do without as she seeks to turn the company round. WPP plans to invest £300m this year in AI tools to make ads cheaper and faster, and has 70,000 employees using its tech platform, WPP Open. That in turn, however, has led to new concerns over job cuts, as well as the dangers of putting too much faith in a fallible, nascent technology which is still very much evolving.
