The author is a Reuters Breakingviews columnist. The opinions expressed are his own

By Streisand Neto

LONDON, June 13 (Reuters Breakingviews) - OnlyFans may be on the block. The platform’s owner Fenix International Limited is in talks to sell to a U.S. investor group at a valuation of around $8 billion, Reuters reported last month, citing three sources familiar with the matter. That’s not especially steep. But given the risks of investing in what is essentially a porn company, a lowball price makes sense.

The site, which has only been around since 2016, has eye-catching financials. OnlyFans saw revenue increase by $217 million to $1.3 billion during the financial year to November 2023, according to its latest available filings. Some of its 4 million-plus content creators, meanwhile, have amassed significant wealth by selling racy videos and pictures.

One, Sophie Rain, claimed to have earned $43 million in one year. If true, that’s more than the National Basketball Association’s top earners like the Boston Celtics’ Jayson Tatum, who got $35 million for the most recent season, according to salary database Spotrac.

Creators on OnlyFans earn 80% of what their fans pay in subscriptions, tips and sales of bespoke content, with the company keeping 20%, known as the "take rate". It earned a roughly 50% operating margin on that revenue in the November 2023 financial year, equating to $649 million of operating profit. Assume that number has kept rising by a fifth annually, as it did that year. On that basis, it could reach $935 million in 2025. An $8 billion acquisition would imply a valuation multiple below 9 times the 2025 operating profit.

That’s not exactly princely. Etsy ETSY.O, a $6 billion platform, trades at 30 times this year’s operating profit, according to Visible Alpha figures, while $144 billion Spotify SPOT.N has a multiple closer to 50.

OnlyFans probably warrants a discount, though. The 20% take rate is no more generous than the one offered by another adult-focused subscription-based platform, Fansly. Conceivably, a rival porn-focused platform could emerge with a more competitive offer to attract creators. After all, some sites that don’t feature adult material already offer lower take rates. Kick, for example, signed up notable streamers in 2023 by offering to take just 5% of subscription revenue.

Then there are the bigger reputational and possible legal issues. In a series of investigations, Reuters examined police and court records that documented multiple cases of sexual slavery, child sexual abuse material and non-consensual or “revenge” porn involving the OnlyFans site between 2019 and 2024. OnlyFans says it prohibits child sexual abuse material and “modern slavery,” including sex trafficking, and removes illicit content as soon as it is detected.

In any case, the takeaway for OnlyFans’ owner Leonid Radvinsky is that creators could one day move to a site with better rates. And many possible investors may prefer one with less noise. That warrants a valuation discount.

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CONTEXT NEWS

OnlyFans owner Fenix International Limited is in talks to sell the porn-driven company to an investor group at a valuation of around $8 billion, Reuters reported on May 22, citing three sources familiar with the matter.

The group is led by the Forest Road Company, a Los Angeles-based investment firm, the report said.

(Editing by George Hay; Production by Ujjaini Dutta)

((For previous columns by the author, Reuters customers can click on NETO/streisand.neto@thomsonreuters.com))