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Cumulus stock
- Thread starter rjt45
- Start date
$1.64 is a 5-year low closing price for Cumulus stock. It was under a dollar back in 2009.
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Cumulus has a ton of debt and is not optimally managing the assets it has. The stock price reflects the near certainty that there will a restructuring, through bankruptcy or another process, that will reduce or eliminate the ownership of the current equity holders.
Dickey can blame Limbaugh, Neilsen or anyone else he wants, but at the end of the day, he was paid, very well, to manage the company, and has done a very poor job of it.
Dickey can blame Limbaugh, Neilsen or anyone else he wants, but at the end of the day, he was paid, very well, to manage the company, and has done a very poor job of it.
They have 1/10th the debt of IHeart. So relatively speaking, they're in good shape. The stock price has nothing to do with the company's ability to service their debt. As long as the income exceeds the debt payment, they're still in business.
The stock is owned mainly by the equity holders and various members of management for the purposes of bonuses. This isn't a typical stock primarily owned by the general public. The equity holders are as much to blame for the stock price as the managers.
Since most 401k plans don't allow purchase of individual company shares, the exposure would be limited to mutual funds that hold shares. The only funds commonly offered in 401k plans that might have CMLS shares are small cap or total market index funds. The exposure of even the largest fund holding shares, Vanguard Total Stock Market IDX, is around $2 million out of $39.9 billion in the fund's total investments.
However, Cumulus might offer its own shares in its employee's 401k. It is somewhat common for 401k's to offer shares in the company that sponsors the program, although most investment advisors caution rank-and-file empoyees not to double the risk of being employed by a company and also investing in it... if anything goes wrong, you lose two ways.
If there's a company match, it would likely be in the form of stock rather than cash.
What is Radio One?
Overly simplistic rationale, BigA. Cumulus is having issues generating adequate cash for debt service and they have far fewer stations. Comparing one over leveraged company to another is hardly a good metric. iHeart is likely headed for a restructuring as well, but the situation is more opaque because it's not a publicly traded company.
If the stock falls below $1 for an extended period, de-listing is a real risk and could lead to a reverse split.
The low stock price indicates that those who have done thorough analysis have a genuine concern of the viability of the company going forward. As I wrote before, Cumulus is headed for a major restructuring either through a debt to equity swap which would dilute the current equity holdings or in bankruptcy court. When? I have no idea, but unless cash flow improves significantly, which is unlikely, it's only a matter of time.
If the stock falls below $1 for an extended period, de-listing is a real risk and could lead to a reverse split.
The low stock price indicates that those who have done thorough analysis have a genuine concern of the viability of the company going forward. As I wrote before, Cumulus is headed for a major restructuring either through a debt to equity swap which would dilute the current equity holdings or in bankruptcy court. When? I have no idea, but unless cash flow improves significantly, which is unlikely, it's only a matter of time.
Over 90% of the stock is owned by 3 hedge funds, the largest being Crestview Partners. They're not going to let the company fail...they have too much of their money at stake.
Yes and no. The hedge fund / owners know that Cumulus is nearly outside its debt covenants, yet even though the share price is in the toilet and far below set strike prices, there's incentive to buy the bonds that fuel the company, because of the yield. So it's a damned if you do, damned if you don't situation which is compounded by the fact that the company can't sell the properties, individually or clusters at today's going-rate multiples. So. What's likely? More layoffs, much as occurred last week at Cumulus' satellite music network. In any case, it won't be pretty and the men and women in the front lines will endure most of the casualties. Call it Citadel redux.
So how's that different from any other radio company? CBS Radio just dropped 200 people, and they have no real debt problems, and their stock is in the 50s.
The price of a share of stock is irrelevant.
What is important are the underlying values such as the P/E ratio.
A $100 share that represents earnings of $5 a share is the same as a $10 share that represents earnings of $0.50 is the same as a $1 share that represents earnings of $0.05 a share.
A better reference would be to ask, "which would you rather have... $10,000 in Cumulus or $10,000 in CBS?" Different investors will give different answers. The speculator will likely see much more upside on CMLS and little upside on CBS. The conservative investor will look at the dividend and underlying value and pick CBS.
I sold CBS at $74, and I haven't bought Cumulus.
I liked CBS when it was in the 70s. I don't like it so much now. I don't expect to buy it again.
Clearly, Lew has to give a good investor's call next week. He has to define a plan for the future. Right now, things seems pretty stagnant. Not a way to inspire investor confidence. As I said, this problem isn't unique to Cumulus. A lot of media companies are having trouble translating their assets into revenue. Lew has made some expensive hires. He needs to explain what they've added to the bottom line. But contrary to another post, I don't see this as a prelude to bankruptcy.
David, there is no P/E ratio for Cumulus because they are at a loss and it appears to be a structural loss, not something caused by one bad quarter or a writedown. I understand completely what you're saying regarding the comparison of share prices and agree, but I think Cumulus, despite it's concentrated equity ownership, is more of a speculation play regarding what will happen with the restructuring, and if they can negotiate a pre-packaged Bankruptcy, or avoid that altogether with another form of restructure.
Either way, no matter how well Lew talks this week, some talks with creditors will have to occur in short order. The equity owners just might be willing to lose their stake if the alternative means they need to put in tens of millions in captial to pay note holders.
Either way, no matter how well Lew talks this week, some talks with creditors will have to occur in short order. The equity owners just might be willing to lose their stake if the alternative means they need to put in tens of millions in captial to pay note holders.
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