Thursday, November 20, 2008

Out of kilter: Stock slide hits NYT activists

A chill wind may be blowing up the kilt these days of Scott Galloway, the colorful investment strategist who persuaded a giant private equity fund that he could show the New York Times a better way to run a newspaper company.

A onetime Internet entrepreneur who earned an extra 1.5 minutes of fame a couple of years ago when he modeled a kilt at a New York charity gala, Scott is the guy who persuaded Harbinger Capital Management to buy almost a fifth of the common stock of NYT Co.

His timbers probably were shivering today when NYT’s stock hit an all-time low after Harbinger disclosed it has begun unwinding its aggressive position in the publishing company. Depending on the timing of the sales, Harbinger’s losses could range into the nine figures.

The precise extent of Harbinger’s apparent drubbing is not possible to calculate, because the Alabama-based investment firm has been buying and (recently) selling stock in NYT for something close to 12 months. Harbinger apparently still owns a significant position in NYT, so there is no way of knowing what the shares will be worth when they eventually are sold. But this much is sure:

When Harbinger disclosed in March that it had acquired 19% of the common shares of NYT Co., its position was valued at exactly $487,122,157.68, according to a statement filed with the Securities and Exchange Commission.

With NYT’s shares closing today at an all-time low of $5.71 apiece (before the company announcedthat is slashing its dividend), a 19% share of the company would be worth approximately $156.3 million, or about $330 million less than in March. That is a 67.9% haircut, if you are keeping score.

The founder of the Red Envelope online gift service, Scott today is a business professor at New York University who also heads an investment-strategy firm called Firebrand Partners.

In that latter capacity, he convinced the $16.4 billion Harbinger fund that NYT’s shares were “dramatically undervalued in terms of their potential” and persuaded the investors to accumulate enough shares to force the publishing company to add him and three other activist directors to its board. After a bit of haggling last spring, Scott gained a seat for himself and one colleague on the NYT board.

Around the same time Scott began lobbying for a seat at NYT, Harbinger grabbed several million shares in Media General in the hopes of getting representation on that board, too.

While Harbinger had a 9.1% stake in Media General back in January, the exact size of its position today is not clear, because the investors have both bought and sold shares throughout the year.

What is known is this: If Harbinger still held a 9.1% position in MEG, its initial investment of $50.8 million would be worth less than $8.4 million today. The 87.7% plunge in value would be enough to flap anyone’s kilt.

Related post

New reasons to take NYT private


Anonymous Anonymous said...

If only there were Darwin Awards for investors ...

4:49 PM  
Anonymous Anonymous said...

NYT common at $5.71 a share?

Today it's at $5.34 a share.

Below $5.00 a share, and most mutual funds and pension funds won't touch the stock.

143,792,000 common shares out there, worth less than $775 million US.

Btw, investors in the NYT common can't get Darwin Awards. NYT "leadership" has permanently won, and in all likelyhood, retired the Darwin Award for newspapers.

7:29 PM  

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