What Is Bloomberg?
If you work in the business world, there's a very good chance you've heard of Bloomberg LP. The company is among the leading providers of financial news and information. It also provides price data, analyst coverage, analysis tools, and other services. it's probably best known for its print and broadcast news services—it owns BusinessWeek magazine and the Bloomberg TV station, as well as several radio stations—along with its flagship Bloomberg Terminal. All of this makes it a sure-fire winner.
As an investor, you may be interested in getting in on the action. But you can't. That's because it's impossible to buy stock in Bloomberg, which is a privately owned company. This article highlights a brief history of the company, how it makes its money, and why it remains privately-held.
- Bloomberg was founded by Michael Bloomberg in 1981.
- The company's Bloomberg Terminals are what bring in the majority of its $10 billion of annual revenue.
- Along with financial technology, Bloomberg is also a media company with broadcast, print, and digital assets.
- As a private company, Bloomberg's ownership is limited, it isn't under the scrutiny of financial regulators, and it doesn't have to report its financials to the public.
History of Bloomberg
In 1981, Michael Bloomberg received a $10 million check as severance when he was let go with Wall Street firm Phibro Corporation, which was being taken over by Salomon Brothers. Bloomberg used this money to team up with Thomas Secunda, Duncan MacMillan, and Charles Zegar to create a new company called Innovative Market Solutions. The company was meant to bring more transparency to the financial system.
IMS developed the Bloomberg Terminal, which it first called the Market Master, to track financial market information and calculate the price of financial instruments. It caught the eye of Merrill Lynch, which invested $30 million in the company in 1984. Renamed Bloomberg LP in 1986, about 10,000 of the company's terminals were installed on the desks of financial professionals by 1991. The terminals are now part of the professional services division, which brings in the majority of the company's estimated $10 billion of annual revenue.
Bloomberg LP bought back one-third of Merrill Lynch's stake in 1996 for $200 million. Bloomberg, which manages Michael Bloomberg's assets, bought Merrill's remaining stake for a reported $4.43 billion in 2008.
Michael Bloomberg holds an 88% stake in the company. He served as its chief executive officer (CEO) until he stepped aside to run for mayor of New York City in 2001, and he returned to that position in early 2015 at age 73.
More Than Just Bloomberg Terminals
According to the company's website, there are 325,000 terminals in use in the global financial industry. This service is provided by Bloomberg Professional Services, which charges users $2,000 per month per terminals. But there's more to Bloomberg than simply financial technology.
The company also has numerous other subscription services, including Bloomberg Law, which competes with LexisNexis, Bloomberg Government, where users can get detailed updates on congressional and regulatory changes and schedules. The latter publishes updated information almost instantaneously.
Aside from the terminals, Bloomberg is probably best known as a media company. It owns and operates television and radio broadcasts, and also has a series of print and digital publications that report financial, lifestyle, and sports news.
Bloomberg Television is a 24-hour cable news network established in 1994. Initially, it was only available on DirecTV, but it soon moved to cable television. Although the network runs more live programming than either CNBC or Fox Business News, it continues to struggle for viewers.
The network went through its largest-ever round of layoffs in September 2015, after which a number of producers resigned. Bloomberg's radio station is available in four markets—New York, Washington, D.C., Boston, and San Francisco.
The company purchased BusinessWeek magazine from McGraw Hill Financial in 2009 and renamed it Bloomberg Businessweek. The magazine was established shortly before the 1929 stock market collapse. Originally aimed at business people, it was later reoriented toward consumers. The magazine hit a high of six million readers in the mid-1970s, but it has faded since then. It's best known for its annual ranking of MBA programs.
Bloomberg Markets magazine ceased publication as a standalone news publication in late 2015. The magazine had long been sent to all terminal subscribers, but the company decided that it outlived its usefulness.
The company continues to provide financial and other news through its website, bloomberg.com. Readers can also get live, real-time data on stocks and other securities.
Bloomberg's closest competitor is Thomson Reuters Corporation (TRI), which also leases proprietary financial information terminals. This company, though, is publicly-traded. It reported revenue of $5.9 billion for the 2019 fiscal year, primarily from subscription sales to its financial news and analysis services. However, the company's Thomson Reuters Eikon platform does not offer anything comparable to Bloomberg's securities analysis, pricing, and trading services.
The next-closest competitor is Morningstar, a publicly-traded company that also offers subscription-based data, research, and proprietary pricing tools but not trading capabilities. Both companies offer detailed investment advice, but only Morningstar provides credit ratings and an investment consulting component. Both have their own publications, but Morningstar does not have a television or radio station.
You can invest in Bloomberg-like companies that provide similar services such as Thomson Reuters and Morningstar.
So Why Does Bloomberg Remain Private?
Going public has many advantages. One of the most notable benefits is that companies can raise capital to fund research, expansion, and other growth strategies. But companies like Bloomberg often remain private for a number of reasons.
For instance, remaining private limits ownership. If Bloomberg went public and offered shares on the open market, that would dilute ownership, spreading it across multiple shareholders. This also means the company would have to answer to these parties about the direction of the company.
Going public also brings more scrutiny to the company by regulators, including the Securities and Exchange Commission (SEC). By remaining private, the company doesn't answer to another party, giving the owners full discretion on how the company is run.
And by remaining private, Bloomberg doesn't have to report its financials to the public. It also isn't required to complete the forms and filings required by public companies such as annual reports.
The Bottom Line
If you're an investor who is intrigued by how diverse Bloomberg seems and how much money it makes, you may want to sit back and relax. The company was private when it was founded in 1981 and has remained that way ever since. If you're still stuck on a company like Bloomberg, consider investing in one of its competitors like Thomson Reuters or Morningstar.