Three weeks ago, Miami-based Spanish Broadcasting System (SBS) released its first-quarter 2020 earnings — a review of the period ending March 31 delayed due to the COVID-19 pandemic.
With its Q2 earnings release date not yet known as many media companies next week will release their third-quarter results, investors have at least one certainty as the owner of Mega TV and some of the nation’s top Spanish-language radio stations enters August.
Its publicly traded stock is about to be delisted.
SBS late Friday revealed that it intends to voluntarily deregister from the reporting requirements of the Securities and Exchange Act of 1934.
Why? SBS explains that, “as it is and has been for all companies,” the COVID-19 pandemic “has provided need, reason and basis for the company to reduce expenses and operate with utmost efficiency.”
With that continuing goal and objective, SBS’s decision to deregister its common stock was “driven by elimination of the significant costs and administrative burdens of preparing and filing current and periodic reports” with the SEC — along with the demands placed on management and the company to comply with Exchange Act requirements.
Perhaps most importantly is, according to SBS, “the low number of holders” of SBSAA, which trades on an over-the-counter exchange.
By delisting its stock, SBS believes it will save upward of $1.5 million per year.
To make it happen, SBS will file with the SEC a Form 15 Certification and Notice of Termination of Registration under Section 12(g) of the Exchange Act. This had not been done prior to Monday’s Opening Bell on Wall Street.
SBS says it is eligible to file Form 15 with the SEC because its common shares are held by less than 300 holders of record.
Spanish Broadcasting System stock as of Friday’s close is valued at 42 cents, and there is no trading on Monday some 10 minutes following the Opening Bell. Its disappearance from public trading marks the end of a nearly 21-year run on U.S. financial markets.
And, it brings to a close trading for a company that in November 1999 enjoyed one of the media industry’s biggest-ever initial public offerings. Some 21.8 million shares were sold to the public, with company President/CEO Raúl Alarcón Jr. retaining a “supermajority” in the company founded in 1983 by his father with the acquisition of an AM radio station in New York — when it became clear the station now known as “Z100” wouldn’t become available.
The 1999 IPO was the second-largest in the history of the radio industry and generated $435 million — much higher than the $280 million SBS thought it would gain from the offering.
SBS’s Wall Street fortunes would begin to dip, however, in the late 2000s. By August 2008, it had difficulty meeting Nasdaq’s minimum listing requirements for its exchange. SBS fought of delisting on several occasions, until it could no longer rally investors. Ultimately, the OTC became home for what is today “SBSAA,” an incarnation of the original SBS stock.
According to Yahoo! Finance, 4 institutions hold SBSAA shares; 7.75% of shares are held by institutions.
While SBS shares will no longer be publicly traded, the company will continue to provide reporting and financial information to holders of its 12.5% Senior Secured Notes and to holders of SBS’s Series B Preferred Stock.
In December 2019, SBS announced its intention to undergo a recapitalization effort. The plan: to arrange secured debt financing in the amount of $300 million. The proceeds from the $300 million of debt financing, plus the proceeds of the additional and incremental asset-based funding, were earmarked for repayment of some $249.9 million of 12.5% Senior Secured Notes and to make cash purchases of its existing Series B preferred stock.
Then, on Wednesday (7/22), came SBS’s annual shareholders meeting. The stockholders considered and voted on one proposal submitted for stockholder vote. There were 4,241,991 shares of Class A common stock, 2,340,353 shares of Class B common stock, and 380,000 shares of Series C preferred stock outstanding and entitled to vote at the meeting.
It is now clear that the vote was tied to the delisting plan, as six directors were easily elected to hold office for SBS. They include Alarcón, former CFO Joe Garcia, advertising industry veteran Manuel E. Machado, veteran attorney Jason Shrinsky, noted private business economist and senior policymaker José Villamil, and Miami CPA Mitchell Yelen.
SBS’s radio stations include WPAT-FM & WSKQ-FM “Mega 97.9” in New York; WCMQ-FM, WRMA-FM & WXDJ-FM in Miami; KRZZ-FM in San Francisco; WLEY-FM in Chicago; KLAX-FM & KXOL-FM in Los Angeles; and top-rated “cadenas,” or networks, across Puerto Rico.
It also operates the LaMusica.com portal.