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.
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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