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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.

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valueinvestingisdead May 14, 2009 @ 7:54 a.m.

Hey, Brandes LOVED this stock. They bought millions of shares. Has to be a major value play.


Don Bauder May 14, 2009 @ 9:08 a.m.

Response to post #4: Yes, as has been reported here several times, Brandes had a huge position in McClatchy. I don't know about Lee, which owns the North County Times. Best, Don Bauder


theace May 13, 2009 @ 5:50 p.m.

Hello Don: I think the UT is a diamond in the rough with the potential for multiple income streams, circulation, classified, to name a few, it was not to long ago that the circulars and classifieds on a Sunday put the weight of my Sunday paper at over 5#, now it weighs less than 1/2 of that. David Copley was a very private person in a very public business and the two never meshed. I met him several times and he was always very polite and kind, once when he was with the newcaster Susan something, I joked to him you know she is after only one thing, he laughed so hard, his ciarette smoke was coming out his ears, he was the biggest human being I have ever seen in my life, but I really think he loved San Diego and its people, he helped alot of organizations and people. I know people are cheering the sale of the conservative UT, but these new owners are only interested in one thing, making money and at whose expense do you think that will be at Don? Sincerely, Ace


Don Bauder May 13, 2009 @ 6:25 p.m.

Response to post #1: The stock market certainly does not believe that metro dailies are diamonds in the rough. Of course, the market is often wrong. In my judgment, Platinum went into the deal because it can flip the real estate. It may be able to break even with the paper and online edition, but that will be difficult. At whose expense will the new owners make money? Current employees, of course. Best, Don Bauder


Visduh May 14, 2009 @ 7:36 a.m.

I agree with you, Don. I suspect that most newspapers will soon be worth nothing. The entire industry is circling the drain. All the papers are cutting staff, and that means that soon much of the news that needs to be reported will go unnoticed. If the paper doesn't give you the news you want/need, why subscribe or even read it? It's already a major issue with the U-T, especially in North County, where major stories get only spotty coverage due to a lack of reporters to cover them. But then, with so little space left in the paper to print the stories, does it matter if no reporter is covering them--they won't get printed anyway.


Don Bauder May 14, 2009 @ 9:07 a.m.

Response to post #3: You make an excellent point. As the papers slash staff, the quality of the product declines. I have noticed that the new U-T owners state that new management will boost revenues sharply with a much leaner staff. But that is not happening anywhere: as you note, almost all papers are cutting staff while the editorial product suffers. The new U-T will have to come up with some new sources of revenue. The big dailies have a major problem: people can get their product free online. So why buy it? Circulation revenues are nowhere near as large as advertising revenues, but they are still significant. Best, Don Bauder


Ponzi May 16, 2009 @ 1:10 p.m.

There's a lot of commercial real estate that is vacant and more to come. Mervyns, Circuit City, Linens N Things, and more space to come; gas stations (many are going to close instead of retro-fit), car dealerships, restaurants and retailers that are just hanging on right now. The commercial market is going to take many years to rebound.


SurfPuppy619 May 16, 2009 @ 4:25 p.m.

The big commercial brokerage firms are all having major financial woes

CB, Grubb, Cushman, Jones Lang LaSalle, all in the toilet.

CB just landed an exclusive deal with the gov to dispose of excess real estate, through the help of major shareholder Richard Blum-whose wife is Dianne Feinstein.

But even with CB selling off major portions of failed bank assets-they still have problems.

I remember when the RTC did this back in the 80's, and they just screwed up the market royally. RTC Chairman Seidman (died couple of days ago) personally devastated the commercial market by selling off the commercial properties in large pools, which limited 90%+ of the market-since only investment banks had a hundreds of millions to invest in market pools. Seidman was a certified idiot. I could nto beleive some of the things that came out of that guys mouth.

When the gov gets deeply involved in major real estate sales nothing good can happen-ever.


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