John T. Griffith 5:14 p.m., May 22
Newspaper Chains McClatchy, Lee May Be Worth Nothing
The prestigious stock-rating firm of Morningstar says that two big newspaper chains, McClatchy and Lee Enterprises, may be worth zero. "McClatchy stock could be worth nothing," says Morningstar, adding that Lee Enterprises "shares could lose their entire value." Fair value of each is listed at $0.00. Both are deep in debt. So did the Union-Tribune really do well by almost giving the paper away? By knowledgeable accounts, it was worth $1 billion five years ago. It has just sold for about $50 million. (One member of the purchase team said the price was below $50 million. Matt Potter reported here that the real estate transferred for $51.2 million. But it was a complicated deal; David Copley may have retained some equity. All told, $50 million or less is a reasonable figure.) In the last five years, stock of McClatchy has plummeted 99.2%. Lee has plunged 97.5%. Stock of the largest newspaper chain, Gannett, has gone down 95.2%. It closed today at $4.27 but Morningstar says it is only worth $2. New York Times stock is down 87% from five years ago; it closed today at $6.39 but Morningstar says it is only worth $3. Gannett and the Times also carry a lot of debt. So the U-T appears to have taken about as big a hit as newspaper stocks are taking in the market. It's doubtful the U-T is making money. One could argue the U-T could have held out for more: it has dumped its debt load. The buyer Platinum Equity can make money on the real estate, which it got cheap. I still believe Platinum would like to vacate the Mission Valley building and outsource printing; that could wait until the commercial real estate market improves (a long time from now, in my judgment) or perhaps a speculator would jump on an empty building now. Once profits are made in real estate, the company could try to break even with the paper and online edition with the small staff, which is almost certain to get smaller, given the new publisher's penchant for chopping heads in his prior jobs. It goes back to personalities: David Copley did not want to own a newspaper anymore, and there was almost no market for metro dailies. That may explain why the company didn't hold out for more.