Thursday, July 17, 2008

Is The Observer-Dispatch About To Go Under?

Psssst...have you heard? The OD is about to go under.

Editor and Publisher, a publishing industry website, is among the sources quoting analysts that the stock of the Observer-Dispatch's parent company, Gatehouse Media, is effectively worthless:

As GateHouse Media Inc. stock sank more than 20% in early trading Tuesday -- briefly touching $1 a share -- Morningstar released a trenchant report declaring shares of the acquisitive community newspaper publisher "could be worthless."

"Because of the company's exposure to a challenging advertising environment, a debt-heavy balance sheet, and declining cash flows, we think the equity shares could be worthless," stock analyst Tom Corbett wrote.

Morningstar reduced its fair value estimate for GateHouse shares to zero from $3 in its report in May.

Morningstar also said GateHouse is close to violating one or more of the covenants on its huge debt. "Should that happen, its debt could become due immediately, resulting in a possible liquidation scenario," Corbett wrote.

After the O-D's editorializing against online content last month I find a delicious irony in the fact they aren't covering their own financial collapse. Instead, you have to rely on...tada...internet websites.

Update: Gotta give props where they're due- I was pointed towards this story by a former local blogger. Sadly, like so many others, he's in the process of leaving the area and moving out of state.

Update: A kind emailer points out that Gatehouse Media shares have dipped under $1 this week. That means they're facing a possible delisting from the New York Stock Exchange.

Update: You can track the stock collapse for yourself at Google Finance.

Update: An emailer claiming to be an employee of the OD says Liberty Plaza is not a happy place to be these days. Not suprisingly, the Boilergasm was a huge drain on a lot of content employees and the drive for sales revenue is relentless. There also appears to be some tension in upper management over the direction of the paper. Take that for what it's worth.

Update: Boom! That's the sound of Gatehouse Media shares hitting bottom. Editor and Publisher is now reporting that the New York Stock Exchange has halted trading in the company:

NYSE Regulation spokesman Scott Peterson said trading of GateHouse (NYSE: GHS) was put under an "operational trading halt" on Tuesday morning. To return to floor trading, a stock must trade above $1.10 a share for an entire trading day.

If the stock continues to close below $1 a share on average over a consecutive 30 trading day period, it is notified that it could be de-listed unless it is able to bring its share price above $1 within six months.

GateHouse shares, which in the past 52 weeks have traded as high as $19.00, have been driven down steeply in recent months as Wall Street began to doubt the Fairport, N.Y.-based publisher's strategy of funding aggressive expansion with big debt while paying out a substantial dividend.

Update: A kind emailer points out that if Gatehouse goes under it's not just bad news for the Observer-Dispatch- the company also runs the "Evening Telegram" in Herkimer and the Little Falls "Times". One of my first jobs was at the Telegram, so I hope the paper is able to get through this and survive.