Ignore the share priceHi All,
Prudent investors would be well advised to ignore the few ups and far more downs of the TS.B shares. I only check it to see how low it can go before it hit bottom. I am guessing when it dips under $.10 it should attract some attention at the Board level.
I don't want to give the Voting Trust credit for a brilliant privatization strategy because I don't believe they possess that level of sophistication. If they have a strategy it was hatched outside the Voting Trust by an investment banker or a corporate lawyer.
Here's how the strategy would play out:
Hire a series of incompetent CEO's and saddle them with an unqualified and incompetent CFO to ensure results drive down the share price.
Take the considerable proceeds from selling Harlequin that generated significant amounts of free cash flow and pour $180 million of it into a dead money investment (VertigoScope) and watch its value fall off a cliff.
Hire an "internationally recognized news media leader" and create an environment that causes him to depart in 10 months. Perpetuate a toxic and dysfunctional culture and crush any initiative that doesn't conform with Honderich's "windsock" strategy.
Promote a non-sensical digital transformation strategy, invest $10's of millions and deliver no tangible results beyond further depletion of cash.
Appoint a publisher of the Toronto Star that does not understand the Toronto media market or the first principles of what makes a great news organization. See The New York Times or Washington Post for replicable examples.
Announce deals with the Wall Street Journal, Apple News+, acquire iPolitics, launch a major national expansion of StarMetro, establish a paywall again for the Toronto Star and botched a transaction with Postmedia. All of these failures and the others that I have enumerated over prior postings point to a strategy that could have no other outcome than to drive down the share value.
This series of value-destroying initiatives may simply be borne of pure incompetence, but they have the effect of providing the Voting Trust with the opportunity to privatize Torstar at a steep discount. Conditioning investors to believe the shares have little value by driving down the share price by reinforcing the street's perception this company is a clown car in search of a fire hydrant to run into before exploding at a nuclear power plant.
So a low share price makes privatization potentially far less expensive to accomplish. This clown car strategy also helps Fairfax because it lowers the potential resistance to privatization. We often hear investors throwing in the towel on TS.B because of substantial losses and the recent suspension of the dividend.
I don't know how or when privatization will play out, but it's going to happen within the next couple of years. The dividend question is going to loom over the Voting Trust as the provision that would convert B shares into voting share would be an ignominious end to their reign of incompetence.
There are considerable benefits to the Voting Trust in privatization in collaboration with Fairfax. Alternatively, Fairfax completely taking out the Voting Trust with a provision for the Voting Trust to provide oversight on the Atkinson Principles would be best for investors and for the hostages who are referred to as employees.
Stay tuned but ignore the share price.
MW