RE:RE:RE:RE:Why Fairfax will prevailHi greybeard,
I personally place very little value in what the bank analysts have to say about Torstar because they have completely lost interest in newspaper companies and Torstar is a leader in the disappointment department. When you see 95% value destruction without any substantive change in leadership the analyst community writes you off as hopeless.
Case in point - the $40 million not so effectively dribbled away on Star Touch could have doubled the dividend to $.20 over the next 5 years. What would be the theoretical implications for the share value at that dividend level? Somewhere in the $3 range would be my estimate, but again it points to to a lack of logical analysis around business opportunities and disdain for shareholders. A tablet application never made any sense and yet they wasted $40 million in the pursuit of the next magic bullet. Even Godfrey told them it was a bad idea which tells you how bad it was.
They will return to a paywall at the Toronto Star arguing that is the only way to sustain good journalism. It failed a few years ago because they fail to grasp the fundamentals of consumer reality and I see no evidence with the current publisher that is going to change.
Here is the secret formula - create compelling content that consumers are prepared to pay for. Tabloid journalism and the crime blotter can be easily satisfied with any number of websites. The Star has to actually provide the best information in the GTA to make the paywall work. It means attracting and retaining the best journalists in the country and having an editor-in-chief who can lead the best newsroom in the country. I don’t think the current publisher has the faintest idea about this concept.
I would also also say that B shareholders aren’t going to get a special wink and a nudge before Fairfax makes its move. I agree with your strategy of continuing to add to your position as the upside far outweighs the limited downside. When Fairfax makes its offer the opportunity will be gone and those who waited for the perfect buying opportunity will kick themselves.