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Waiting For The Institutions

Sinclair's stock is falling precipitously, an entirely predictable result of the management's decision to deploy the shareholders' assets in an unrelated, controversial political cause. The question, really, is less about what kind of impact this affair will have on Sinclair's profitability (though it won't be a good one) than about what kind of a person would entrust their money to managers who are this irresponsible. Several large institutional investors have stakes in Sinclair, and if you've got your money bound up with one of the institutions in question you should strongly consider getting in touch with them and suggesting that they not play the role of last sucker on this sinking ship. No one likes to sell at a loss, but things are only going to get worse from here on out.

October 18, 2004 | Permalink

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» Sinclair, boycotts, and free speech from Majikthise
Some right wingers are complaining that the a politically motivated boycott violates Sinclair's right to free speech. In fact, the boycott undermines the right of Sinclair's management to use the company as a bully pulpit. [Read More]

Tracked on Oct 19, 2004 12:35:30 AM

» Escarpments and Entanglements from Obsidian Wings
I don't know if an 8% slide is "falling precipitously," as Matt Yglesias claims, but I, for one, like my corporations to serve their shareholders -- by, e.g., making money for them. I'm a radical capitalist, I know. So I'm [Read More]

Tracked on Oct 19, 2004 11:55:57 AM

» Gift Basket from Tom Jamme's Blog
Sweet Blessings, a new Christian-based online shop featuring cookie bouquets, candy bouquets and gift baskets, opens with a campaign to donate a portion of all profits to Habitat For Humanity. The devastation of hurricanes Katrina and Rita, while not a... [Read More]

Tracked on Oct 7, 2005 12:04:09 PM

» Gift Basket from Tom Jamme's Blog
Sweet Blessings, a new Christian-based online shop featuring cookie bouquets, candy bouquets and gift baskets, opens with a campaign to donate a portion of all profits to Habitat For Humanity. The devastation of hurricanes Katrina and Rita, while not a... [Read More]

Tracked on Oct 7, 2005 12:07:09 PM

» Gift Basket from Tom Jamme's Blog
Sweet Blessings, a new Christian-based online shop featuring cookie bouquets, candy bouquets and gift baskets, opens with a campaign to donate a portion of all profits to Habitat For Humanity. The devastation of hurricanes Katrina and Rita, while not a... [Read More]

Tracked on Oct 7, 2005 12:09:24 PM

» Gift Basket from Tom Jamme's Blog
Sweet Blessings, a new Christian-based online shop featuring cookie bouquets, candy bouquets and gift baskets, opens with a campaign to donate a portion of all profits to Habitat For Humanity. The devastation of hurricanes Katrina and Rita, while not a... [Read More]

Tracked on Oct 7, 2005 12:10:05 PM

Comments

Here's a suggestion for socially responsible investing. Anyone with $50 or $100 or so in an E*Trade account should contribute to the cause by shorting Sinclair. Let's short squeeze these worthless fucking shits until they scream. Down 7.81% to 6.49 today. I think we can see 5.50 by the close tomorrow.

Posted by: Short SBGI! | Oct 18, 2004 7:03:12 PM

I have a contrarian view on this. After they show the pic on Thursday, the stock will bounce right back up when the company doesn't immediately go under. So institutions who get out now could end up getting asked why they panicked based on the short term movement instead of holding on for the long haul. Heck, it might be institutions who are buying at these lower price levels.

Posted by: Colorado Luis | Oct 18, 2004 7:14:13 PM

That's a distinct possibility, Colorado Luis. Today may well have been the end of the short-sell gravy train. But I can dream, can't I? Maybe Soros could step in and put the squeeze on.

Posted by: Short SBGI! | Oct 18, 2004 7:21:19 PM

Freedom of speech at work, don't like what someone's saying try to bankrupt them.

And you wonder why Kerry will lose.

Posted by: Ral | Oct 18, 2004 7:24:03 PM

Apparently Ral has misinterpreted "freedom of speech" to mean "speech should be free" of consequences. Um, no.

Posted by: neil | Oct 18, 2004 7:38:32 PM

Freedom of speech at work, don't like what someone's saying try to bankrupt them.

You mean like this?

Boycott launched of anti-Reagan CBS series
Show’s advertisers will be targeted for 30 days
http://www.renewamerica.us/news/031027cbs.htm

And you wonder why Kerry will lose.

Lemme guess. Because some of his supporters on Matt's blog have suggested employing the same, highly effective tactics used by rightwing groups?

Posted by: Paul Callahan | Oct 18, 2004 7:40:12 PM

I've been kinda concerned that Sinclair is willing to risk the losses they are bound to endure. They must have some serious concerns before the FCC and members of Congress. Since the Repubs are in control, who do you think they're trying to influence? Yea, Sinclair's existence is partly due to the fact that the owners want to spread the Right's message, but they sure are willing to lose money for these people. What's that about? It just gives me the creeps.

Posted by: Babba | Oct 18, 2004 7:49:55 PM

Babba, there are some limits to the losses they can endure. One poster to the Yahoo! Finance Sinclair message board points out that the Smith bros., who own the majority of the stock, have borrowed heavily against their shares, and will likely get a margin call if the drop continues.

It's also possible, but unlikely, that shareholders can sue to block the board from taking these destructive actions. Apparently the FEC filings for this company contain a clause which specifically states that the majority shareholders may pursue a course of action which will help their other interests but may harm those of minority shareholders. But is this binding? Who knows, IANACL.

Posted by: neil | Oct 18, 2004 8:02:46 PM

I asked the same question along with a few others last week in a post over at Angrybear. Some of the commenters then blasted me as not being a good economist (Kash came to my defense quite ably). Let's hope your commenters are kinder and gentler as your is a very good question - and better put than my version.

Posted by: pgl | Oct 18, 2004 8:40:43 PM

Sinclair Broadcasting's decision to exercise their right to freedom of speech with important election material days before the election is a clear example of the Constitutional right to freeedom of speech in action.

Sinclair is obligated by law to serve the public interest and they are doing so with their decision to broadcast Stolen Honor.

The partisan smear campaign against Sinclair's Constitutional right to freedom of speech shows that there are domestic enemies in our midst, traitors to be more accurate, who seek to usurp our Constitution and our national heritage.

I think Sinclair's moral duty to broadcast Stolen Honor outweighs any fiduciary duty to shareholders of a company that is already so leveraged it has negative tangible book value.

Posted by: Modern Crusader | Oct 18, 2004 9:00:30 PM

there are domestic enemies in our midst, traitors to be more accurate

i demand that you apprehend these criminals and deliver them to the proper authorities, with utmost haste!

Posted by: cleek | Oct 18, 2004 9:11:41 PM

What Matt says is especially true if you have any funds in TIAA-CREF. Their customer base is teachers and academics, who are probably mighty displeased about Sinclair. They are indeed aware of the controversy, but their current policy is to do fuck-all. Let them know they're damaging their customer relations and they might change course.

Posted by: raymond | Oct 18, 2004 9:31:44 PM

michael moore showing fahrenheit 9/11 on showtime the night before election day: freedom of speech

sinclair broadcasting showing a film that would be of interest to many viewers who want to be informed about a candidate: oppression of speech

Posted by: jihad | Oct 18, 2004 9:35:31 PM

Remember the terrorism market? Bad idea, but not necessarily from a predictive standpoint. . .

If Bush wins, then Sinclair wins. Not only because of their political tendencies, but also because we know Bush will relax restrictions on media ownership. Which is the only reason Sinclair isn't traded on the pink sheets right now.

The fact the stock is plummeting may be as good a predictor of Kerry's strength as any poll out there.

Posted by: edub | Oct 18, 2004 9:42:05 PM

There's a big difference between Showtime and Sinclair affiliate, ahem, cough cough, BROADCAST stations. The airwaves belong to the people and are licensed out.

I don't realy know if the FCC should get involved, nonetheless. . .but perhaps you grumps are leaving notes on Matt's board b/c you can't leave them on Josh Marshall's? Matt's been mostly talking about stockholder activism, and that's just as much a matter of free speech as anything else.

Posted by: Sahei | Oct 18, 2004 9:44:55 PM

Showtime isn't using the public airwaves. It's a false comparison.

Posted by: Paul Callahan | Oct 18, 2004 9:45:26 PM

Just a couple of things about shorting Sinclair. The average trading volume is about 350k ish, the huge drop caused by a massive increase in volume (roughly a million shares). Of course, depending on how much you trust techincal analysis, it might make a good short - but I think trading on outrage is a pretty sure way to blow up. Still, might be some good trade bait for a while.

On an unrelated note, this shouldn't be particularly suprising. Sinclair's management has shown itself to be particularly adept at destroying shareholder value - the stock price hasn't moved (prior to the self-destruct of the past couple of days) since it's IPO. The bosses of Sinclair have shown a remarkable aptitude for throwing money away at stupid, stupid, unrelated investments, i.e. car dealerships. Basically, if you're invested in Sinclair, and you're not a part of the Smith family, well, you should have done your research. The reason for selling Sinclair is not that they're running a partisan campaign or anything like that, but because their management sucks. And isn't going anywhere.

However, to be fair, the Smith family owns the majority of the company, and if they feel like they ought to piss their money away, then that's their right. Of course, if it runs afoul of the law, then that's another thing entirely.

Posted by: Jason | Oct 18, 2004 10:46:45 PM

Errr, just realized I didn't complete the thought. With such a small trading volume, if you get a massive number of people shorting the stock, you're only going to jack the price up, screwing everybody in the process. If you can cause a widespread panic and dumping of the stock, then maybe - but given the shares controlled by the Smith family, not too likely. Risk just seems too high.

Posted by: Jason | Oct 18, 2004 11:16:11 PM

This isn't about freedom of speech. Sinclair is a publicly-traded company. Management is taking huge risks with other people's money.

Rational investors should stay the hell away from Sinclair. There are basically two possibilities: a) management cares more about politics than profitability; b) they are playing a very risky game

If this is a profit-seeking risk, Sinclair must be betting that it can single handedly reshape the cultural and regulatory climate. So far, the strategy doesn't appear very successful. People don't like that kind of behavior from media companies. Advertisers don't like it either.

Sinclair is making a lot of political enemies. If the Democrats win, they're absolutely fucked. If the Republicans win, Sinclair will get some big favors--but they will simultaneously galvanize a large segment of public opinion against themselves and against the media consolidation upon which their profitability depends. Either way, Sinclair will become the Halliburton of broadcasting.

At best, Sinclair's managers are guilty of wishful thinking. At worst they are criminally mismanaging the company. Don't expect the markets to approve.

Posted by: Lindsay Beyerstein | Oct 18, 2004 11:33:18 PM

The Sinclair stock is probably not a bad proxie for the election of George Bush (instead of using Iowa or tradesport). If Bush gets in, SInclair will be rewarded, and it will have made the right (i.e. the profitable) decision. If Kerry gets in, retribution will be at hand.

Posted by: Andrew Boucher | Oct 19, 2004 1:16:35 AM

Modern Crusader | October 18, 2004 09:00 PM

>Sinclair Broadcasting's decision to exercise their right to freedom of speech with important election material days before the election is a clear example of the Constitutional right to freeedom of speech in action.

Get off your high horse. The entire government licensing scheme of the broadcast spectrum is a violation of freedom of speech and of the press. It gives companies like Sinclair exclusive use of certain channels, and prevents anyone else from broadcasting. It is the broadcast analog to the government limiting the amount of newsprint that is available and determining which companies can buy it, and in what amounts, in the traditional print media.

The only reason that Sinclair is doing this is because they have lots of business before the FCC and believe that the FCC will be better for their business under a Bush administration than under a Kerry administration. It has nothing to do with "public interest."

Posted by: raj | Oct 19, 2004 7:27:24 AM

Sinclair is a publicly-traded company. Management is taking huge risks with other people's money.

These kinds of decisions aren't made without a 'go ahead' from major shareholders. They are, indeed, playing with the money of small investors, but there is no doubt that their major shareholders are OK with this.

Not necessarily because they love Bush, though; perhaps they feel that all this publicity is going to benefit them in the end. There is no bad publicity in the entertainment business, you know.

Posted by: abb1 | Oct 19, 2004 7:45:15 AM

Modern Crusader just demonstrated that he has no principles whatsoever. What a shocker.

Posted by: JP | Oct 19, 2004 8:07:58 AM

Actually, once this blows over people will forget and then its a question of whether they are earning money.

To me the thing you have to watch out with these types of companies is insiders taking advantage of dips to buy back stock.

Posted by: Chad | Oct 19, 2004 9:33:17 AM

I was assuming the Modern Crusader post was parody, what with the part about "domestic enemies in our midst." Based on the replies, I'm not so sure.

The suggestion that Sinclair is willing to screw their shareholders just to keep the public informed is very funny though.

FWIW, I also think that a real conservative would hold Sinclair's fiduciary responsibility more important than some imagined commitment to the public good: if the FCC is not requiring them to air a particular "informative" item, then they should air those with the greatest value to their company and shareholders.

Posted by: Paul Callahan | Oct 19, 2004 10:36:40 AM

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