Lee Enterprises attempted to do its investors a favor a week ago, announcing the company would buy back $30 million of its own shares. Wall Street not only failed to send a thank you note -- the investment community, in effect said, "I hate it." Lee's stock price, already beaten down to about $12 a share, fell further.
Buying your own company's stock is a slightly arcane financial maneuver, intended to improve the key metric of earnings per share by reducing the number of shares outstanding. For companies spinning out a healthy amount of cash without obvious other places to invest, buybacks are an attractive option. Newspaper companies have done so often -- though some critics would prefer increased dividends as a mechanism for rewarding shareholders when revenues and earnings are not rising quickly (as they do at so-called growth stocks).
The move makes particular sense if shares are cheap or as Lee CEO Mary Junck put it in her announcement."The true value of Lee stock is currently greatly undervalued on Wall Street." Junck has a point. As we noted
in our earlier post on year-end stock prices, Lee was among the worst 2007 performers -- despite having healthy profits margins, less severe revenue and earning losses than other public newspaper companies, and the highest percentage growth in Internet advertising.
Evidently investors simply do not like the prospects of companies like Lee, McClatchy and Journal Register that are exclusively in newspapers. Better to have the buffer of local television in an Olympics/political year, or an entirely separate business like Washington Post's Kaplan education subsidiary.
As for the buyback brushoff, Bank of America analyst
Joe Arns speculated to Reuters that perhaps the street was expecting it would be bigger. That seems like asking grandma after she sends a $50 birthday check, "Why wasn't it $100?'"
