There was a strange development today. Westwood One was essentially taken over by its bondholders a few months ago. There was what should have been a “pro forma” meeting today with the Westwood One stockholders, to approve a 200-1 reverse stock split, and to increase the number of authorized shares. Westwood One’s stock has been delisted from the NYSE and now trades on the OTCBB at about 5 cents a share. The logical reason for such a drastic reverse stock split would be to enable the company to return to being a listed stock to then sell stock to raise caseh – however the stock price is not the onlyquality factor in the listing requirements at an exchange.
Jim Bohannon aside, most of what WestWood One does is broadcasting sports. They have large expensive contracts with the NFL , PGA and NCAA. Competition from other companies (like Sirius/XM) and declining ad revenues might explain today’s action.
This is entirely speculation – but if Westwood One goes into bankrupcty, they could get out of those contracts – or under the threat of bankruptcy the sports organizations might renegotiate the terms. Westwood One also has a 10 year contract with CBS Radio to sell commericals and provide technical services.
Westwood One has an ownership equity of –224 million, and lost $16 million in the first 3 months of 2009.