On Friday afternoon, investors of American newspaper media company Lee Enterprises (US:LEE) were graced with a 13D filing from activist investor Mason P Slaine, who disclosed a 5% stake in the company from ownership of 299,000 LEE shares.
The LEE stock price traded broadly flat over the day until the announcement, which induced some last minute sales and made LEE close -1.6% lower.
Lee Enterprises stock in 2022 has lost -54% of its value since hitting a multi-year height of $44.43 in January. The stock currently has a market capitalization of around $101 million and trades on an undemanding price to earnings (PE) ratio of ~10x.
In the filing, Slaine states that he may be interested in having discussions with Lee’s Board regarding “whether the Issuer should withdraw from the public market and become a privately held company”.
Slaine believes that Lee Enterprises could unlock further shareholder value by delisting and taking the company to private ownership.
Mason told the Board that if they are keen to pursue a strategic option such as this, he would be interested in discussing financing options for the transaction.
By no means is Mason Slaine the largest and most powerful investor on the register. He falls behind hedge funds Cannell Capital LLC which owns ~8.1% of the stock and Praetorian Capital Management LLC that owns ~7.2% of the stock.
Lee Enterprises last reported third quarter earnings in early August to investors with flat revenue over the year at $195 million and net loss of -$269,000 compared to a net profit of $3.2 million in the prior year.
Disruptive industry trends remained with print revenue falling by 18% over the year to $44.8 million while digital revenue grew 26.6% to $46.2 million.
The driving factor for the swing to a loss from a profit in the prior year was the heightened restructuring and other costs which equated to $6.1 million compared to $1.4 million in the same period of 2021. In addition to this, other operating expenses grew 7.2% over the year, which was offset by a -5.6% fall in the level of compensation paid to employees.
The groups CEO and President Kevin Mowbray noted that the company exceeded their full year targets in digital subscriptions and revenue a quarter ahead of schedule, positioning the company to finish the year strong.
Management reaffirmed that they expect to generate positive adjusted EBITDA between $95 to 98 million for the full year.
A chart from Fintel’s financial analysis page on the stock shows revenue and profitability trends over a 5 year time horizon against the stock price.
Analyst M. Kupinski from Noble Financial Group remains bullish on the company because it trades on a discount to peers while generating consistent growth in its digital business. The firm has a $50 target for LEE
Fintel’s institutional ownership accumulation score of 83.02 is quite bullish on the stock. This score ranks LEE in the top ~5% of 28,940 screened companies when comparing levels of institutional accumulation.
LEE currently has 84 institutions on the register that own a total of 2.1 million shares on the register or about 59% of the total float. Some of these institutions include: Cannell Capital Llc, Solas Capital Management, Strategic Investment Opportunities LLC, Dimensional Fund Advisors Lp, Wittenberg Investment Management and Praetorian Capital Management.
This article originally appeared on Fintel
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