Tuesday, 19 January 2016

Postmedia Stock target goes to zero

Postmedia Stock target goes to zero

I started writing this blog a few days ago (Jan 17), based on the news below:

Persistently underwhelming revenues ahead of a looming maturity wall prompted RBC Dominion Securities to cut its price target on Postmedia Network Canada Corp. to zero from $0.50.
Postmedia operates Canada’s largest newspaper chain and various digital media properties, including the National Post.

“While management continues to evaluate options with respect to the capital structure, it is difficult to attribute positive equity value to the shares absent a meaningful improvement in underlying operating trends ahead of significant debt maturities in August 2017 ($313-million first-lien notes) and July 2018 ($359-million second-lien notes,” wrote analysts led by Haran Posner.
It’s rare but not unprecedented to see an analyst slap a price target of zero on a stock. RBC’s move puts Postmedia in the same unenviable company as Radioshack.com LLC and General Motors Co.
Globe and Mail Report on Business, Jan 15, 2016

That article had reminded me of something that I had read in political pundit and campaign strategist Warren Kinsella’s blog a few weeks earlier:

Warren Kinsella – Dec 27, 2015

More than anything, I wanted to be a journalist. I started creating my own newspapers – ironically enough, about professional wrestling – when I was 10 years old.

During law school, I had the privilege of working for the Calgary Herald before Conrad Black and his henchmen gutted it. Before, during and after being called to the bar, I had the privilege of working at the Ottawa Citizen before things got bad there, too. 
In 2016, I anticipate the end of the Sun chain in the first quarter, and the end of the Postmedia chain in the third… It will be bad for a lot of amazing people – and for our democracy, too. 

In only two days, events have caught up and passed me, with the following on the CBC website today:

Postmedia cuts 90 jobs, merges newsrooms in Vancouver, Edmonton, Calgary, Ottawa

'We will continue to operate separate brands in each of these markets,' CEO Paul Godfrey says

Newspaper chain Postmedia today announced sweeping changes to its operations, cutting 90 jobs across the country and merging newsrooms from multiple newspapers into one each in Vancouver, Calgary, Edmonton and Ottawa.
At least 90 editorial jobs are being cut as a result of the process.
They partially break down as follows:
·         35 in Edmonton.
·         25 in Calgary.
·         12 in Ottawa.
·         5 at the National Post.

Is this to be the common fate of much print media (including big book publishers) in the new world?  It’s hard to say.  Postmedia had some unique problems related to taking on a lot of debt a few years back, as outlined in an earlier blog that I did:

It looks like they aren’t going to be able to pay that debt off, given current economic circumstances and ongoing disruption in the newspaper business.  There is an irony here – the National Post and associated newspapers have been great at scolding governments for taking on too much debt over the years, as well as average consumers.   So, some people are bound to be feeling a bit of schadenfreude about their current troubles.

Of course, it is possible that the debt-holders could give them a break on the interest rates, when the debt matures in 2017 and 2018.  In a normal business, facing a normal cyclical downturn, that could be the case.  But the debt-holders, a couple of asset management funds (Canso and Golden Tree), are known to be pretty hard-headed types, so giving a break to a heavily indebted company that is in an industry that is being badly disrupted by technological change might not be high on their to-do list.

As for me, I will miss the New York Times crossword puzzle that they carried, as well as a few decent columnists.  It will be interesting to see how the next period plays out, as the loans still have a while, before they can be called in totally, if I recall correctly.  But it looks like there will be a Last Post playing, soon enough.

In military tradition, the Last Post is the bugle call that signifies the end of the day's activities. It is also sounded at military funerals to indicate that the soldier has gone to his final rest and at commemorative services such as ANZAC Day and Remembrance Day.May 3, 2012

And here's an xkcd comic, about the transitory nature of all media, including newspapers:

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