Audacy Stock Trading Halted

[TheBigA]

CBS was top-heavy. When Entercom took over, they began cutting the "weight" almost immediately, perhaps without taking into account the expensive people they showed the door were responsible for CBS being a "cash cow" in the first place.

The other part of it (and this is common with mergers) is that the CBS people got paid more and had a better benefits package. When they merged in with Entercom, there was resentment to that, especially in markets where former competitors were being merged together in the same building.

There was also some integration with the TV stations that was difficult and expensive to break.

 

[TheBigA]

And who did he report to? The whole Redstone play was growth, father and daughter.

Things were not that simple. Sumner was not involved in the radio sale and Shari had regrets. She was in a power struggle with Moonves:

Shari Redstone v. Les Moonves: A Timeline of the Battle for CBS

Two years of sparring culminates with a tumultuous month of courtroom battles -- with more drama to come

www.thewrap.com

The Redstone battle was with Karmazin. The idea of selling radio was strictly Moonves.

 

[davideduardo]

Things were not that simple. Sumner was not involved in the radio sale and Shari had regrets.

It's disingenuous to think that Shari and Sumner did not talk, and that both of them did not talk with Redstone. Expressing contrarian opinions is why we try to hire people who are not clones of ourselves.

She was in a power struggle with Moonves:

Shari Redstone v. Les Moonves: A Timeline of the Battle for CBS

Two years of sparring culminates with a tumultuous month of courtroom battles -- with more drama to come

www.thewrap.com

But they all shared a dislike for low growth or no-growth divisions. They were all rather draconian in their decisions; the whole organization was not considered a "warm and nourishing" place to work.

 

[TheBigA]

It's disingenuous to think that Shari and Sumner did not talk, and that both of them did not talk with Redstone.

You may want to rewrite that. Sumner & Shari WERE the Redstones. There was no third party.

 

[davideduardo]

You may want to rewrite that. Sumner & Shari WERE the Redstones. There was no third party.

For sure! Done.

 

[Mark Roberts]

There may be errors of judgement in the Audacy case. They may not have anticipated the pandemic and the recession or the impact of streaming. They may not have been as good as they thought they were, and their lenders believed they could do what they promised.

In a nutshell, poor risk management. I've seen this time and again in cybersecurity, and many of the same principles apply to financial management - with the root cause being overconfidence and not considering "known unknowns" and "unknown unknowns" (notorious phrases, I know, but they get the point across). I could write an ocean full of words on the subject, but that's the essence.

The most important thing in risk management is for the board of directors not to be sleepwalking. Unfortunately, far too many boards of directors do just that.

Johnson & Johnson did not know talcum powder was dangerous. 3M did not know that its military hearing aids were dangerous. Hohns-Manville did not know asbestos caused cancer. S--t happens. But, generally, there is no conspiracy there or in the case of Audacy. Just lack of knowledge.

The second most important thing in risk management is for issues to surface to the appropriate level of management for resolution. The bigger the company, the harder that is to ensure. When someone covers up an issue because they'll look bad in front of their boss, even the most rigorous risk-management protocols will lose effectiveness. When there are layers of bosses to deal with, there's a greater likelihood that something will get covered up along the way.

 

[TheBigA]

There seems to be a view here that all they need to do is fix the debt situation, and they'll return to a $5 stock. I don't see it that way. The reason the debt is a problem is because the fundamentals are bad. The revenue situation is bad. The way they view they business is flawed. Otherwise the debt would not be a problem.

I will go so far to say that buying CBS Radio wasn't the problem. But buying it and then quashing the business development that had been taking place there was the problem. I've seen this before. The buyers think they are experts and have the solution, and then we find out that they don't. This is why I go back to saying Audacy needs a larger partner to take the attention off the debt, and put attention on new business development. By new business, I don't mean more :30 spots or increasing the spot price. I mean diversification beyond the towers & transmitters business. That's what they need, and until that happens, they will continue going from crisis to crisis.

 

[radiofan2023]

There seems to be a view here that all they need to do is fix the debt situation, and they'll return to a $5 stock. I don't see it that way. The reason the debt is a problem is because the fundamentals are bad. The revenue situation is bad. The way they view they business is flawed. Otherwise the debt would not be a problem.

I will go so far to say that buying CBS Radio wasn't the problem. But buying it and then quashing the business development that had been taking place there was the problem. I've seen this before. The buyers think they are experts and have the solution, and then we find out that they don't. This is why I go back to saying Audacy needs a larger partner to take the attention off the debt, and put attention on new business development. By new business, I don't mean more :30 spots or increasing the spot price. I mean diversification beyond the towers & transmitters business. That's what they need, and until that happens, they will continue going from crisis to crisis.

One of their other problems is they don’t have actual podcasts of each of their station talk shows. You can replay some of them for a few days on their Audacy app, but after that, you’re out of luck.

 

[TheBigA]

One of their other problems is they don’t have actual podcasts of each of their station talk shows. You can replay some of them for a few days on their Audacy app, but after that, you’re out of luck.

That's part of what I'm talking about. It's not strategic. Most companies their size have strategic planners who see the assets and determine how to monetize them. They don't seem to do that well. Everything is market by market. They thought they had to buy a podcasting company to do that. Hubbard thought the same thing ten years ago, and realized it wasn't necessary. Cumulus uses Omny Studio. They didn't spend money buying another company. Omny handles the who backend for them. The preveious CEO thought he needed to buy Rdio to get into streaming. He was wrong. Audacy didn't learn from his mistake. They made it again.

 

[MarkW]

Your last two posts were spot-on, BigA. Beautifully stated.

 

[Kelly A]

One of their other problems is they don’t have actual podcasts of each of their station talk shows. You can replay some of them for a few days on their Audacy app, but after that, you’re out of luck.Audacy waited too long to get into the streaming/podcasting side of the business. Likely it's too late now.

But just look at other previously-popular media organizations who were going full speed at podcasting. NPR is a great example. They just laid off 10% of their staff, including many of their podcast staffers. I agree that media stocks are taking a hit because Wall Street no longer sees any growth potential. Traditional radio and TV especially, have shown little to no growth potential. As BigA mentioned prior; this isn't a problem unique to Audacy, other than than they're toward the bottom of the pile. All media stocks have been taking a beating lately. Not sure why some on this site take such weird perverse pleasure, in regularly siting Audacy as an example of what's wrong with radio.

 

[Mark Roberts]

Another thing to keep in mind is that the stock market tends to run on a lot of emotion and herd-like behavior. Where real problems tend to be uncovered often is in the bond market. As James Carville once said, "I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody."

 

[exdjted]

Let me ask this: Would replacing David Field at Audacy calm investors and give the stock a short-term boost by admitting that there are major issues in leadership, or would that further devalue the stock by changing horses mid-stream? I know he would fight being removed as he and his father are the majority stockholders, and it is therefore very unlikely to happen, but part of me has to believe it would show the stockholders and Wall Street that they acknowledge that problems exist and that a change in leadership is the first step in a turnaround.

 

[TheBigA]

Let me ask this: Would replacing David Field at Audacy calm investors and give the stock a short-term boost

Who would do it? His daddy? Remember that David and his father have 22% of the stock and sit on the board of directors.

Then the next question is who would replace him? Whoever it is has to have $2 billion in his pocket. Otherwise, who cares?

That's why I say that the only solution I know of is for the Fields to sell to some with deep pockets.

There has to be someone who has more weight than the Fields. At Cumulus, that was Crestview. They brought in Mary Berner. At Citadel, that was Forstmann. They ultimately pulled the plug and that led to bankruptcy. Someone has to have the power to make a change, and I don't know who that person would be. If there's going to be a palace coup, it will happen at the stockholder's meeting on the 24th.

 

[101tm]

Audacy has been trying to play catch up to what iHeart and others were doing a decade ago without the resources or time to carry it out. iHeart has been aggressive with developing national talent and diversifying outside of radio in to other entertainment areas (such as the awards shows, which can be used on the stations as a contest, and the stations can promote it).

Audacy tried nationalizing some programming with alternative and country, and it was quite a flop overall with the alternative stations with just bits and pieces of it left. It was barely tested. The app, which was built off the (bad) Radio dot com app and supposedly the company’s future, is still horrible. On half of the stations it doesn’t show the artist and song title. Unless it’s something like WFAN that listeners can’t get elsewhere, I would think many would be frustrated by the UI, frequent crashes and overall clunkiness.

I also don’t see them selling many stations unless they have something EMF or SBS may be interested in. They might could trade some stations to Cumulus, but the issue there is both companies seem to do best in medium and “smaller” large markets where a lot of their stations are. Entercom had strong clusters, and many of those are still the strongest clusters under Audacy. The folks in Bala Cynwyd weren’t ready for NYC, and NYC wasn’t thrilled about the folks in Bala Cynwyd.

This isn’t a situation that can be fixed, IMHO.

 

[Tibbs4]

You know how to make a small fortune in the restaurant business?

Start with a large fortune....

Sorry, but I see this entire radio charade as too many decades of too much desire to have a bright toy that everyone wants and once you get the toy, you tire of it and forget it and are left with the credit card payment. The mega-billions thrown at the commercial radio industry since de-regulation is how many times more than the actual profit before debt service since then? You have to make smart deals and that's done when you agree to buy a business, not after. The crazy thing to me is that the Entercommode "deal" was a carbon copy (remember carbon paper?) of a dozen similarly flawed plans. And yet all these intelligent businesspeople walked right into the traffic knowing they had a 100% chance of getting hit. Now, the bright toy is like a Beanie Baby or Pet Rock. No one wants them. Deep pockets can't fix this. The prices these stations would get on the true resale market would equal how much vs. all the debt? Sometimes, BigA, it's better to say no and walk away wishing you had these stations vs. being stuck with them knowing there is no way out. Like we have discussed before, you can't :30 second your way outta this mess. Not enough time on the hot clock. It's sad. There still is value in these properties at realistic prices. That's the problem. That's what's also wrong with "debt." What is WCBS-FM worth now? I know my approach is very uneducated and elementary. I have learned these principals the hard way. And when that ship sinks, it's funny that all the experts are nowhere to be found to actually help.

 

[TheBigA]

What is WCBS-FM worth now?

Hey Tibbs, the problem isn't what it's worth. The problem is nobody would buy it. The cash flow is around $20 million. Who would pay a multiple of that for one station? What, to you, is "the right price?" By the time the price gets low enough, the business isn't worth owning anymore. We may already be there. We probably are for AMs.

 

[PTBoardOp94]

Let me ask this: Would replacing David Field at Audacy calm investors and give the stock a short-term boost by admitting that there are major issues in leadership, or would that further devalue the stock by changing horses mid-stream?

Audacy is in "considerable doubt exists about the company's ability to continue as a going concern" territory according to their auditor.

Auditors don't do that for fun. In fact, when such statements are made, bankruptcy is by far the most common outcome.

Reshuffling from the Fields might have made sense at one time. That time has come and gone.

 

[TheBigA]

In fact, when such statements are made, bankruptcy is by far the most common outcome.

This gets back to the question I asked: Who makes that decision? It won't be the Fields, because it turns their stock into confetti.

 

[Mark Roberts]

What is WCBS-FM worth now?

It's worth whatever a buyer is willing to pay for it.