So what’s Postmedia worth?
A rare big stock trade last week offered a useful indication, and it’s not pretty.
When the company stock started trading in June 2011, the price was around $13 a share. Multiply that by the number of shares - about 40 million - and you have a value of $524 million.
The trade last week was at $1.65, suggesting a value of $67 million. Which means the company’s value has fallen by 85 per cent in a little more than two years.
The trade mattered because it was large. The stock is mostly held by the big lenders who financed the acquisition of the newspaper company and Postmedia daily trades are too small to give any real indication of value.
But last Thursday, about seven million Class B shares traded hands in a single transaction, almost 20 per cent of the total outstanding.
It’s unclear who was selling or buying. The Class B shares are reserved for foreign owners as part of Postmedia’s strategy to qualify as a Canadian company. That’s critical; businesses can claim the cost of advertising in Canadian-owned newspapers and magazines as a tax deduction.
The sale, one month before the company releases its next quarterly results, at least raises questions about whether one of the original lenders that financed the deal has decided to abandon ship.
For earlier posts on newspapers' woes, go here.Footnote: Class B shares, foreign-owned, represent about 97 per cent of the stock, but are limited to 49.9 per cent of the votes in any matters to be decided by shareholders. It’s not credible to claim the company is really Canadian-controlled when Canadians or Canadian institutions own three per cent of the stock, and foreign lenders hold the debt, but the structure meets legal requirements.