Regarding Morningstar columnist Matthew Coffina’s pronouncement that Citadel Broadcasting’s stock is worthless, my inclination is to say B.S., and I don’t mean Barbra Streisand! Maybe the stock isn’t cranking out dividends, but that’s not where we find the value in a broadcast company or even a station. So maybe he’s correct, maybe the “stock” is worthless, but that doesn’t mean the company or station is worthless. And to anyone, and I mean anyone who holds that Citadel stock who believes it’s worthless, just send it to me and I’ll be happy to take it off your hands for that worthless amount!
The value of a broadcast station is in the franchise – the license to provide service to a community and generate revenue and hopefully a profit. To the degree there’s greater revenue and/or greater cash flow, the greater the value. Any radio station has an intrinsic value. It’s not just “location, location, location”, but that plays a big part. Unless the local economy is “zero,” there’s value. To my way of thinking, in a perfect world, we would have no publicly traded broadcast companies. John Malone, the financial genius of Tele-Communications, Inc, Liberty, and others, was wont to say that his company was not about making profits, it was about building wealth. That’s the heart of what we do…build wealth (or at least attempt to do so). If Wall Street and other equity investors are expecting to be able to stand at the head of the payline for their regular check, then perhaps they should be putting their money in cash-and-carry businesses. A broadcast acquisition makes its profit when it is purchased. The properly purchased station or construction permit start up should be able to show an annual rate of return in the 10% to 20% range. If you calculate in the benefits of pre-tax losses for several years, that R.O.I. increases. That’s based on a Fair Market Value tied to revenue, cash flow, or the promise of those at liquidation or refinance. To the Wall Street vultures: get in another business. To the owner/operator: your equity (especially these days) has to come from sources other than the publicly traded equity markets. The value is there, even for the smallest peanut whistle in the smallest market. Understand it, believe it, make it happen.
Brett Miller
MCH Enterprises, Inc.
