Penny stocks proliferate


Radio stocks continue to take a beating on Wall Street. Both Beasley and Salem last week fell into penny stock territory, joining quite a few other radio companies. Who else is in danger of doing the same?
2007 may have been the year of penny stocks for the radio sector, as we noted in the Intelligence Brief on last year’s stock market activity released on Friday, but the “year of woe,” as we described it, is certainly continuing into 2008. Regent, Emmis, Radio One, Westwood One and Citadel all saw their stock prices fall below the five bucks mark over the course of 2007. Many pension managers and mutual funds aren’t permitted to own penny stocks, so when a stock dips below that barrier, a round of selling often follows, just accelerating the stock price decline.

Salem crossed the magic barrier last Wednesday and Beasley followed on Thursday. Despite the pending 11.50 per share bid to take the company private, Cumulus Media is the radio stock next closest to the line, recently trading below six bucks. Saga Communications, likewise, has been below six of late.

RBR observation: Expectations of a flat revenue year, at best, doesn’t do much to put a floor under radio stock prices. Growing indications that the US economy is about to fall into recession, or already has, will continue to put pressure on all stock prices. Anyone who thinks they are snapping up bargain stocks right now could well be right, but they may have to hold on for a bumpy ride before realizing profits.