Wednesday, January 14, 2009

Canwest death watch

Today, Canwest posted profit numbers that were about 25% below analysts' expectations. It's interesting that in the press release and subsequent coverage, there's almost nothing said -- bad or good -- about Canwest's newspaper holdings. Leonard Asper is quoted in several of the linked pieces explaining that he believes the company's potential for growth lies in specialty cable channels and web sites. More ominously, the company warned that it is having serious troubles with its debt. Reuters goes into that in much more detail than the Canadian media, and reports Canwest might sell assets and make other moves to stop the bleeding.
So far, Canwest's answer to its newspaper management problems has been to nickel and dime its journalists with buy-outs and layoffs and to send self-syndicated pap from its Ottawa newsroom to what were once great metropolitan newspapers. Canwest blames the economy, not its own management and quality problems, for its troubles.
The stock went from a low of 34 cents in early December to about 90 cents at Christmas before settling around the 80 cent mark lately. There have been some high-volume (for Canwest) trading days lately, and it will be interesting to see if the trades were made by Prem Wata, who now owns about 20% of the stock. I suspect they were trades made by the people who were smart enough to short this stock. Last summer, Canwest was one of the most heavily shorted stocks on the TSE, which meant the investment community was betting against it.
There's a conference call today between Canwest and some business reporters. It should be interesting to see what comes out of it and how the stock moves today. As of 9:50 a.m., there hadn't been any reported trades.


In the first 40 minutes of trading, Canwest went from 80 cents to 52 cents, a 35% drop. As of about 3 p.m., volume was about one million shares traded. In the recent run-up from 34 cents to 90 cents, volume was usually only about 50,000 shares a day.

Like I said below, last week was a good time to sell.

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