Monday, February 25, 2008

Wall St. to Sun-Times: So Long, Sucker

Sun-Times Media Group is getting the bum's rush from investors.
With its stock price dropping below $1 per share, the Sun-Times Media Group has been banished from the New York Stock Exchange, which last week suspended trading of the company's common shares.
This is standard-operating-procedure for the Big Board, which quickly turns its back on stocks that fall below $1.05 benchmark. Not known for sentiment, the NYSE contends the Sun-Times stock has got to go because it may become too volatile and threatens to disrupt trading on the exchange.
That's giving this little company more credit than it deserves. Nonetheless, the suspension is another dose of noxious financial news for the media company and a sad indication that it is quickly running out of time and options--even as Sun-Times management seeks to avoid more deep cuts or an outright bankruptcy.
And it may get worse.
If the company fails to get into compliance, the NYSE could delist the Sun-Times stock. If so, the media company's shares would be relegated to the "penny stock" world, which is often viewed as ultra-risky and a haven for fast-buck artists.
Moreover, a delisting would gut whatever remaining value the shares hold, virtually ending the Sun-Times Media Group's life as a publicly-held company. Delisting would make the Sun-Times company an even greater outcast with financiers, lenders and other potential money sources.
(Last year, the company revealed it could not get bank financing.)
The company may try to get back in the NYSE's good graces by doing a reverse stock split. That's basically a procedural play--a move that allows a company to reduce the number of outstanding shares, create fewer shares and raise the per-share price.
Even so, that tactic would be a temporary solution and perhaps a distraction to the bigger mission, namely finding a buyer for the entire place.
Unfortunately, with each passing day that's looking less plausible.
Some mid-sized media firms may take a run at the company's weekly newspapers or smaller dailies but the outlook for the flagship Sun-Times isn't promising.
It would take a hearty sort to buy the urban tabloid and that buyer has yet to surface. And I don't think Tribune Co. CEO Sam Zell is anxious to enter into a joint-operating agreement. Sam's got his own problems and agenda.
Still stranger things have happened, so hang on.
But one thing is certain: Don't count on Wall Street for any help. It's already given up on this company.

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