Cumulus Stock Sliding After Reverse Split


It may be too soon to sound the alarms, but shares of Cumulus Media have swooned since shareholders last Wednesday approved a 1-for-8 stock split.

The vote, conducted at a special stockholder meeting at 9 a.m. on Oct. 12, effectively put shares at $2.60 at the opening bell on October 12; the reverse split became effective at 5 p.m., and by then the value of the combined shares had already decreased.

As of Friday’s close, CMLS shares sit at $1.94.

The reverse stock split was implemented primarily to increase the trading price of Cumulus Media’s Class A common stock. Doing so was necessary to regain compliance with NASDAQ listing requirements and “to enhance the liquidity of the Class A common stock.”

As a result of the shareholder vote, the number of authorized Class A shares dip from 750,000,000 to 93,750,000; Class B shares shrink from 600,000,000 to 75,000,000; and Class C shares are clipped from 644,871 to 80,609.

CMLS shares had been drifting between 31 cents and 36 cents per share over the last months; Cumulus’ Class A shares moved from the NASDAQ Global Select Market to the NASDAQ Capital Market on May 3. Without the reverse stock split, the Class A shares would have faced delisting for failing to meet the minimum share value of $1.

Crestview Radio Investors holds 29.4% of Cumulus’ voting power, while former Cumulus CEO Lew Dickey Jr., who relinquished his CEO duties in October 2015, maintains 13.5% of the company’s voting control and remains Cumulus’ vice chairman. Cumulus President/CEO Mary Berner holds less than 1% of the company’s voting power.


Meanwhile, a damning article appearing Oct. 14 at notes that the creditors of both Cumulus and iHeartMedia are sending “distress signals.”

The highly negative piece opens with the line: “Video killed the radio star. Now, a massive pile of debt is threatening to bury it.”

The piece, which does not take note of any other radio company’s fiscal health, notes that — “according to people familiar with the matter” — creditors led by Franklin Resources Inc. have hired PJT Partners Inc. to advise Cumulus on talks with the company.

These same mystery sources tell Bloomberg’s Emma Orr that PJT is also working with a group of Franklin-led creditors at iHeart.

In addition to highlighting the “wall of debt coming due by 2019 that collectively tops $10 billion,” Bloomberg takes note that “advertising revenue for traditional radio stations” in 2014 and 2015 declined by 3% while digital ad revenue grew 9% and 5%, respectively, during those years.

Bloomberg also took the opportunity to plug online streamers Pandora, Spotify, and Apple — with no mention of their enormous royalty costs and how it will continue to greatly impact revenue.

The focus on Cumulus and iHeart diminished comments from Gabelli & Co. research analyst Brett Harriss. In the story’s final paragraph, Harriss is quoted as saying, “Radio businesses might not be particularly attractive or sexy in the world of Facebook and Twitter, but they’re still decent businesses. They still have very high margins and generate a ton of cash, so there’s no reason to think that radio goes out of business tomorrow.”