COVID-19 crisis as a "Black Swan" event for the Voting TrustHi guys,
First and foremost: stay well and healthy!
With respect to Torstar, I'm with Mediawatcher. The advertising revenues (especially local print and also flyer distribution) will be impacted in a way never seen before. In the mid- to longterm this will only accelerate the shift to digital, but on the very negative side a lot of employees will be impacted in this difficult time. One major advantage of Torstar in this time is its cash position and the fact that it has no debt. Especially in this crazy environment, cash is king. Many other newspaper chains (e.g. Postmedia in Canada; the newly merged Gannett in the US) have a lot of debt, which could be their death knell in this downturn. If the government does`t help the print media in a very significant way (which I doubt, because it has so many industries to help now), the closure of many newspapers will be a given. This COVID-19 crisis will incredibly accelerate the transformation (I hate this word...).
As Media said this unforeseen crisis comes at the worst time for the Voting Trust. Some of the problems the Voting Trust faces now:
- Clock ticking down until B shareholders get Voting Rights
- This crisis will cost significant additional cash through lost revenues (advertising and flyers) and restructuring costs
- M&A markets frozen, which makes it very difficult to sell the Verticalscope (which will be impacted as well, because even digital advertising is shrinking these days) or Blue Ant stake, through that generating some fresh cash
-> Because of the above, it could be nearly impossible to reinstate the dividend after Q4 2020 without triggering a case of "oppression remedy".
-> The Voting Trust now faces a real risk to lose control of Torstar at the end of 2021!
Furthermore, the Voting Trustees (and all the families that are financially connected to it in any way) have seen their portfolio values crash over the last few months. This won't make them feel better, I suppose....
In my humble opinion, the unforeseen pandemic crisis and the economic downturn will force the Voting Trust to give up some control and sell, merge or take private Torstar with the help of Fairfax. Torstar needs a strong financial partner (aka "White Knight") for the future. I'm pretty sure that some M&A action will take place within the next 12-18 months before B's would be allowed to vote. I have no idea for what price, but certainly a lot higher than today's.
All the best to all of you,
Don