Friday, November 14, 2008

Today in roadkill

Today's close: A record intra-day low of 66 cents, a record low close of 73 cents.
How low will it go? I have no idea. Like Nortel, it may go to zero. All this stopped making sense months ago. My gut tells me it's a good time to buy this stock and hope that shareholder equity isn't wiped out, but do it only if you have money to lose. If shareholders maintain some grip on this company's assets, they should be worth something in a few years and under new management. But if the compoany does go bankrupt, the shareholders will be screwed. It might be worthwhile to see if insiders are selling off, something they're within their legal right to do. The only thing that's stopped me from buying some of this stock is my concern about a conflict of interest, since there are quite a few people who follow this story by coming here.


Globe and Mail media reporter Grant Robertson wrote a large feature on CanWest for today's Report on Business that talked about everything but the quality issue, which is actually the company's biggest problem. Here's the piece, which addresses CanWest's big debt problems and mentions the buy-up of stock by Fairfax.
CanWest's inability to create good content does almost surface in the discussion of the Australian TV network owned by CanWest, which is third in the ratings in a rather small market.
Mediocrity is killing CanWest. You simply cannot gut newspapers and expect people to buy them. You can't show NCIS, a tedious fiction drama, on the History Channel three times every day and expect people to watch. CanWest under-rates the public, failing to realize that the Ottawa Citizen is not a good enough paper to sell in a national capital and the National Post is not good enough to compete with The Globe and Mail. There are no newspaper monopolies anymore, even in single newspaper towns. CanWest needs to learn that lesson.
And Global TV can barely compete with CTV. They're both so bad, but they each buy enough American hits to survive. That will change as more specialty cable stations pick up material from HBO and Comedy Central, which are leaving the US networks in the dust.
I doubt the future holds any happy surprises for CanWest.



CanWest lost $1.02 billion in the last quarter, more than $5 per share. Much of this was a paper loss, a one-time charge to reflect the deterioration of the value of its assets. The actual, cash loss was about $10 million.
CBC's take on it is here.
Interesting that they would take such a huge charge at one time. The charge -- about 15% of the value of the company -- combined with the effects of a very unimaginative and rather lame cost-cutting drive that is certain to reduce revenue and value in the company, might push the stock down ever further.
CanWest is a heavily-leveraged company that could suffer severely in a recession. The next two quarterly reports, covering the fall of '08, (when the markets and public clued in to the '07 subprime collapse), and the recession Christmas that's coming, will be very important.

INJURY TO INSULT:

Arthur Kent is adding to his Alberta lawsuit against CanWest and columnist Don Martin by filing a new action in New York.

Meanwhile, TorStar hit a 52-week and a new modern low, dropping 9% today to close just over $9. The stock traded over $30 two years ago.

6 comments:

Anonymous said...

CanWest dead pool:

National Post completely shuttered in 7 months.

Ottawa Citizen asset sale in 12 months.

Ottawa Watch said...

People have been predicting the Posy's demise since Day 1. No one has made any money yet voting against the Post.

The Financial Post will survice.

Anonymous said...

You're optimistic, but I think that CanWest has killed the historic Financial Post brand. Boy was that a good standalone paper. Unfortunately, I'm still betting it will go the way of Saturday Night.

Ottawa Watch said...

Saturday Night was pretty much crippled by Black and the Aspers, but it was killed by St. Joseph's, which saw no point in competing with its own Toronto Life brand.
I thiknk the Financial Post could make it under new owners.

Anonymous said...

Good post.

Hate to be a copy-editing douchebag but i think it's Arthur Kent.

Although i am curious what Peter's thoughts are on the suit.

Ottawa Watch said...

Thanks. I fixed it.
Long morning, long day.