You may remember a post from July discussing cuts at the Journal Star and the condition of parent company, Lee Enterprises. At that point, the stock was around $3, putting the company’s value around $145 million. Today the stock is struggling to stay at $.60. If the $3:$145m ratio holds, that would put the entire company’s value around $30 million (the market cap is at $27.49m as of writing, with shares at $.61). In December 2004, this same company was valued around $2 billion. The parent company of 52 newspapers is worth less than The Huffington Post.
The company is now in danger of being de-listed from the NYSE. The company’s net value change since 1978 is .30%. That’s not a typo — I didn’t confuse .30 and 30%. The value has increased less than one third of one percent in the past 30 years. But timing is everything:
Had one purchased Lee Enterprises stock in 1978 and sold it at the beginning of 2007, one would have enjoyed a 3,131.44% return on one’s investment.
A recent newsosaur post illustrates the likelihood of a very grim future for several publishing companies.
Companies like GateHouse Media, Lee Enterprises, McClatchy, MediaNews, Morris, New York Times Co., Philadelphia Media, Star Tribune and Tribune are obligated to improve their profitability in the coming years to repay the principal and interest on money they have borrowed to make acquisitions.
In the event the publishers are unable to meet those obligations, their creditors will move in to slash expenses; attempt to sell off assets to generate cash, and take every other step necessary to sustain the properties as going concerns.
This will last as long as the newspapers continue to generate operating profits. But it is highly unlikely in this environment that any creditor would provide additional cash to prop up a money-losing newspaper.
In other words, a newspaper that cannot sell enough advertising or cut enough expenses to sustain profitable operations is not likley to make it to the other side of 2009.