Remember $1.90 on May 4th? Torstar’s market cap is careening to under $100 million – the dividend yield is now 7.25% and volumes have picked up noticeably at the end of the week. We saw 1,400 shares traded on Monday and rocketed to 83,515 today. The stock closed at $1.38 on Friday representing a 27.4% decline in less than a month with no corporate development news to tip the market in any direction. What might all this mean?
I think sellers have grown weary of the empty plans and quarter after quarter of dismal results with the same headwinds claptrap and other tired excuses for poor performance. The 3 year top secret plan from Boynton is digital fantasy talk from a guy neither invested in Torstar nor in quality journalism. If I didn’t think Fairfax was going to assume control of Torstar at some future date and that the shares are massively undervalued I wouldn’t touch this stock as well.
If your intent was to privatize Torstar at the lowest possible cost how might you execute that plan if you were the Voting Trust? Start with hiring a series of CEO’s with no CEO experience and no clue about how to manage the transformation of a business in freefall. Add a CFO with no CFO experience or competence in a distressed business that needs the sharpest financial mind to sort out this mess. Keep a meddling and incompetent chairman in place for a decade and recruit and retain a feckless set of board members and pay them all handsomely to preside over this disaster.
With all of this in place and after years of discouraging results, you attempt to buy out the B shareholders whom have hung on to the bitter end for a fraction of their investment and the real value of Torstar. Those shareholders who are selling now have given up hope and can’t imagine a way out of this mess. The buyers and those holding onto their shares see the value of Torstar’s assets and are prepared to force a fair price when privatization happens.
I still believe the $7/share range is achievable and continue to accumulate at these bargain prices. It may take years or possibly months, but something has to give on this stock.