This has been the year of the penny stocks in broadcasting. No, not that radio and TV penny stocks have been great money makers. Rather, quite a number of companies whose stock price was previously above the five bucks cut off have slipped into penny stock hell. Lots of pension funds and other institutional investors have prohibitions against owning penny stocks. Also, they aren’t marginable, so active investors who trade on margin don’t want to own them. Thus, when a stock drops below that magic five bucks line, dumping often drives them even lower before they stabilize.
Who all has dropped into penny stock hell this year – many of them just in the last month as stock prices in general were beaten down? Citadel, Radio One and Westwood One are recent radio additions to the club. In television, ACME recently fell into penny stock territory. What’s worrisome is that several other broadcasting stocks are in single digits and could also be beaten down further if a real bear market takes hold: Emmis, Saga, Beasley, Gray Television, Salem and even Cumulus, should its pending going-private buyout not be completed.
So far in 2007, only one broadcaster has managed to escape from penny stock hell. Nexstar began the year at 4.65 and pushed above 10 bucks based on its financial performance even before the company announced in May that its entire TV group was up for sale. That sale process was recently put on hold because of the well known difficulties in the credit markets, but Nexstar’s stock price still remains a few bucks out of penny stock territory.