Citadel bets on McClatchy


We now know why shares of McClatchy have been shooting up lately. Citadel Investment Group revealed in an SEC filing Friday that it has accumulated a 5.7% stake in the newspaper company's Class A stock. Citadel is the primary owner of Ion Media Networks, but this won't create any problem with the FCC. The McClatchy family has iron-clad voting control of McClatchy via their Class B shares. 

SmartMedia observation: As badly as Wall Street has beaten up on broadcasting stocks, it has been even more negative on newspaper stocks. Traders brutally punished McClatchy for buying Knight-Ridder and the stock has continued to decline (until just a few days ago), despite McClatchy having successfully sold off the Knight-Ridder papers it didn't want in markets where the local economy doesn't have long-term growth prospects. So, it has been reducing debt and will likely sell off its stake in (inherited from Knight-Ridder) to further reduce its debt load. Citadel may not be bullish on the newspaper industry, so much as the hedge fund figures McClatchy is in better shape than most of its peers and its strong cash flow is undervalued in its stock price.