Venerable Penton Media Inc., publisher of New Equipment Digest and Internet World, faces the prospect of having its stock delisted by the New York Stock Exchange.
The Cleveland-based media company was warned last month of its potential delisting because its share price traded at under $1 for 30 consecutive days.
Following notification, companies generally have six months to boost their share price above $1 to maintain their listing. Penton, however, may have less time, because its share price is "abnormally low," according to the NYSE. Pentonâs stock closed at 29 cents on Sept. 5.
"Iâm sure theyâre looking into every option there is to prevent [delisting] from happening," said Robert Crosland, managing director of New York investment bank AdMedia Partners Inc. "Itâs something they want to avoid simply because it makes it really tough to move the share price when youâre delisted."
Other b-to-b media companies that recently have flirted with delisting from major stock exchanges include Key3Media Corp. and Verticalnet Inc. Key3Media, which operates the Comdex trade shows, eventually was delisted by the NYSE and now trades on the OTC Bulletin Board. Verticalnet, a b-to-b darling of the Internet bubble, remained on the Nasdaq Stock Market only after executing a reverse split.
"Iâm fairly confident about our ability to get through this," said Thomas L. Kemp, Pentonâs chairman-CEO.
So far, Pentonâs stock market woes have had little apparent effect on the marketers and media strategists who use the companyâs magazines, trade shows and Web sites.
"If Iâve seen any weakness at all, itâs that the issues have been a little thinner this summer, but that is, of course, the summer," said Kevin Arsham, b-to-b specialist at BBDO, who often recommends Electronic Design and Machine Design to his clients.
"Penton has a 100-year reputation and solid management over the years, as well as a No. 1 position in their market segments for a lot of books," said Doug Baillie, VP-marketing communications for Acuity Brandsâ Lithonia Lighting unit. "Those are much more compelling facts than stock performance or the companyâs revenues."
Poor financial performance is common in this extended media recession, which saw trade publication ad spending decline 20.8% in the first half of 2002 compared with the same period last year, according to Competitive Media Reporting. Pentonâs performance has been exacerbated by the companyâs aggressive move into technology, a sector where average spending declines have approached 50%.
Pentonâs acquisition of Internet World magazine and its related trade shows, a move that initially was hailed by Wall Street, has ultimately damaged the company, industry observers say. Internet Worldâs revenues declined 74%, from $21.6 million in 2000 to $5.6 million in 2001. Additionally, revenues dropped 19%, from $3.2 million in the first half of 2001 to $2.6 million in the same period this year.
The Internet World show and other technology trade shows have also performed poorly for Penton. Tech trade shows and conferences accounted for a $22.9 million revenue decline in the second quarter compared with the same period a year earlier, according to documents Penton filed with the Securities and Exchange Commission. As a result, the Internet World propertiesâ contributions to paying off the loan used to buy them have dwindled, industry observers say.
In response, Penton has made a number of moves to blunt the effect of its long-term debt, which stands at $345 million, according to a Bear, Stearns & Co. Inc. research report. Penton reduced operating costs by $63 million in the first half of 2002 compared with the same period last year, shed all of its bank debt, and does not owe any principal payments to its bondholders until October 2007.
"They look pretty good for the short term," Crosland said. "Theyâve done all they can do in terms of streamlining the company, but theyâre in the markets they are in."
Dogged by the recession in b-to-b media, Pentonâs revenues and earnings before interest, taxes, depreciation and amortization have continued to disappoint investors.
On July 18, Penton issued revised guidance, warning Wall Street that its revenues were expected to be $245 million to $270 million, down from $280 million to $320 million forecast on May 1. Additionally, Penton said its adjusted EBITDA would be $25 million to $35 million, as opposed to the guidance provided Jan. 7 of $50 million to $60 million.
With that announcement, Pentonâs share price promptly plummeted below $1, closing at 34 cents on July 18, down from $1.21 the previous day.
Looking for a boost
To boost the share price, Penton is considering a number of moves, including a reverse split.
"A reverse split can work sometimes," Pentonâs Kemp said, "but often they donât work. You do a reverse split, and the share price goes back to where it was."
The company may also consider selling properties.
Shareholder and fund manager Mario J. Gabelli has lobbied to remove Pentonâs poison pill provision so that he can gain more control of the company, presumably to force management to sell properties to boost shareholder value.
"We donât feel that we have an immediate need to sell assets," Kemp said. "However, it wouldnât be something we would absolutely not consider."
Industry observers say the only sure way for Penton to rise is for the companyâand b-to-b media in generalâto begin posting better financial results.
Kemp said he expects Pentonâs third-quarter results will begin to show a glimmer of year-over-year improvement.
In the meantime, while Penton struggles to boost its share price, it may face another NYSE warning for dipping below $15 million in market capitalization for 30 consecutive days. At press time, Pentonâs market cap had been below $15 million since August 20.
Observers are split on Pentonâs outlook. Some say bankruptcy reorganization is a possibility. Others are more optimistic. "Itâs a tough situation, but not an insurmountable situation," Crosland said.