Why Did I Buy CanWest Stock?
It keeps plunging, rocked by a perfect storm of debt and downturns.
Value of CanWest shares over past two years.
How low can it go? That's the question I'm now asking about CanWest Global Communications.
If you've read my book, Asper Nation, which was published a year ago and was excerpted in these pages, you'll know that I ask a lot of questions about CanWest, especially about the political bias of its owning Asper family of Winnipeg and its control of much of Canada's -- and of most of Vancouver's -- news media.
But I never thought I'd end up owning the company.
Unfortunately, that's exactly what happened recently when I bought 500 shares of CanWest stock. They were trading at about $1.40 in mid-October after the stock market meltdown, which was down from more than $10 just over a year ago and $15 in mid-2006. Only a month ago, the Globe and Mail -- hardly a friend to the Aspers -- enthused about the "pent-up value" that was just waiting to "burst out" of CanWest shares, which were then trading at around $3. Then came the big crash, and suddenly CanWest shares were half-priced again.
It was a perfect investment opportunity, or so I thought. How could I lose? After all, I literally wrote the book on the company, which not only owns a national television network, but also owns Canada's largest newspaper chain. As Lord Thomson of Fleet famously observed from experience, owning television was "just like having a licence to print your own money." And the Southam dailies CanWest bought in 2000 from Conrad Black as he fled the country (on his way to landing in a Florida prison) generated profits of 20 to 25 per cent, from what I could tell.
'We're not too worried': Leonard Asper
If anyone should have been a good judge of CanWest's viability, you'd think it would be me. But no. Since I shelled out my hard-earned $700, shares in CanWest have continued to slide.
What went wrong? Just a few things.
First, almost as soon as I bought into CanWest, its Australian operations reported fourth-quarter earnings down 79 per cent from a year ago. CanWest owns 57 per cent of Network TEN in Oz thanks to the ingenuity of late company founder Izzy Asper, a sharp tax lawyer who in 1992 found a loophole in that country's 15 per cent limit on foreign ownership of media. The Aussies soon closed the loophole, but ever since then Network TEN has looked a lot like our Global Television (affectionately known to some as the "Love Boat Network" for its reliance on re-run Hollywood fare) and until recently had been a bulwark of CanWest profitability.
Izzy's sons, Leonard and David, who have run CanWest since his death in 2003, decided not to sell the company's stake in Network TEN last year after Australia lifted its media ownership limits entirely, including a long-standing prohibition on cross-ownership of newspapers and television, thanks largely to Asper activism. Newspaper owners lined up to bid for CanWest's majority share of TEN, but the Aspers decided to hang onto it despite an earnings downgrade due to growing concern over the economy. "We're not too worried about cyclical downturns," explained Leonard on a recent visit to Sydney. "These things come and go."
Stock analysts were less than impressed, however, and began downgrading CanWest stock despite the CEO's insistence that Network TEN had "a lot of growth opportunities."
Enter Goldman Sachs
The other main reason for CanWest's slide has been growing concern among investors that the Aspers may have painted themselves into a corner with their acquisition last year of 13 cable channels formerly owned by Canadian media giant Alliance Atlantis. As CanWest's fortunes dim, it is becoming increasingly obvious to many that this ill-advised expansion could even contain the seeds of the company's demise. Unfortunately for Canadians, it could also result in the country's largest television company soon being mostly American-owned. The dominoes became aligned after the Aspers set their sights on the baker's dozen cable channels Alliance Atlantis put up for sale in late 2006, including HGTV, Showcase, and History Television. Broadcast TV has become increasingly subject to competition for ever-more fragmented audiences in the 500-channel universe, not to mention the interactive web 2.0 world. CanWest lacked outlets in the lucrative cable genre, and the Asper boys fairly lusted after some.
There was only one problem -- they couldn't afford to make an offer on their own for the Alliance Atlantis channels because CanWest was still heavily in debt after borrowing almost $4 billion in 2000 to buy Southam. No Canadian bank would lend them the money, so the Aspers went cap in hand to Wall Street and sold Goldman Sachs, a giant private equity firm, on a scheme to carve up Alliance Atlantis.
The Wall Street investment bankers bought Alliance Atlantis's movie division, theatre chain, and the lucrative CSI franchise, which was held jointly with CBS. Goldman Sachs and CanWest went in together on buying the cable channels, with the Americans putting up 64 per cent of the $2.3-billion purchase price.
Might CanWest cede control to Americans?
The deal was rife with peril for CanWest, as it gave Goldman Sachs a buyout option that could force the Aspers to buy its shares at a certain price. It also called for a merger in 2011 between their cable partnership and CanWest's broadcast operations, including Global Television and the E! network. The division of ownership between CanWest and Goldman Sachs will depend on the relative earnings of each part of the combined enterprise. If CanWest earnings continue to fall, Canadians will likely wind up as minority owners.
"We could see CanWest losing its shirt over this," warned media critic Ian Morrison of the lobby group Friends of Canadian Broadcasting. "It actually put us in a situation where in the worst case scenario here, we think the Aspers could lose CanWest."
Despite flouting Canada's foreign media ownership limits, which directly and indirectly (through a holding company) are supposed to add up to 46.7 per cent, the deal was quickly rubber-stamped by an Asper-friendly Conservative government. With the world economy slumping and advertising revenues already in the toilet, it now hangs like an anvil around CanWest's neck. The company's fourth-quarter earnings should be released next month.
String of controversies
Another reason for CanWest's fall from stock market grace might be a growing public -- and investor -- distaste for Asper antics. These have included the pro-Israel, anti-CBC, global-warming-dismissing news media manipulation that I chronicled in Asper Nation. CanWest media outlets have enthusiastically pushed a neo-liberal economic agenda of deregulation and a neo-conservative political agenda of American military intervention, albeit occasionally over the protests of their journalists.
Recent hard-line tactics may have also given the company a black eye. These have included lawsuits against not only this publication, which was recently settled, but also one against activists who printed a four-page parody of CanWest's Vancouver Sun. It mocked the Sun's news coverage of the Middle East conflict as blatantly pro-Israel government, which drew the ire of the ardently Zionist -- and litigious -- second-generation Aspers. While the case has scarcely been reported by large corporate media outlets, it has attracted much grassroots opposition from people and groups who consider it a groundless SLAPP suit (strategic lawsuit against public participation) and a serious infringement of free speech.
Along with the Aspers' controversial 2001order that their major dailies all carry "national" editorials written at company headquarters in Winnipeg and their 2002 firing of Ottawa Citizen publisher Russell Mills for defying their political agenda, these episodes might be seen to erode the company's credibility -- a valuable asset for any news media firm -- which could undermine investor confidence.
Share price drops below $1
Media economist Robert Picard has noted that communication empires, like other empires, don't last forever and often not even for as long as we expect. Conrad Black, who looked invincible as Canada's media potentate a decade ago with his launch of the National Post, actually only topped the heap for a little more than four years. The Asper ascendancy has already lasted twice as long.
"Media empires are not permanent and omnipotent but rather are subject to the internal needs of organizations and bureaucracies, as well as external economic, financial, and regulatory forces. Those who wish to control or reduce the harmful effect of empires must understand the capitalist environment, as well as the forces driving empires and their leaders."
Those factors must include psychological considerations, as Black's fall doubtless demonstrated that behind his business cunning lurked a self-destructive side that pushed him to go too far and get caught swindling shareholders. The Asper heirs are driven by a desire to not only promote their father's political agenda, but to expand his media empire even further. Those aims may not be shared by other CanWest stock holders, who might prefer a reasonable return on their investment instead. As a result, and with CanWest's share price briefly dropping below $1, some are clamoring for more professional leadership of the company.
So much for 'convergence'?
At least for the next handful of years, CanWest should "continue as a going concern," given that large amounts of its $3.7 billion in debt won't come due for payment until 2012, a TD Newcrest financial analyst said this week, even as he declared the company's shares are no longer worth the risk.
But the stock market soured long ago on media "convergence," the notion that bigger is always better. Any Asper insistence on hanging onto both newspaper and television assets in an economic downturn may further accelerate investor flight from CanWest.
Asset sales are probably the only thing that might keep the Aspers' heads above water in the maelstrom, most logically their newspaper holdings, which include both of Vancouver's biggest dailies. That would mean more diversity of Canadian media ownership.
Either way, I figure I can't lose. At least, not more than $700. C'mon boys, you can do it!
Related Tyee stories:
- 'Asper Nation' Excerpted (Series)
Marc Edge takes a hard look at media concentration in Canada. - How Big a Story Is CanWest's New Deal?
Big merger causes existential crisis for Canadian journalism. - Senators Let Big Media off Hook
Committee's long-awaited report shrugs at CanWest, targets CBC.
![[Tyee]](http://thetyee.cachefly.net/ui/img/ico_fishie.png){kind=small}
Luke Skywalker
23-10-2008
An Opportunity...
Based upon the old adage: Business is Business, this apparently looks like a great opportunity for those who despise the so-called politically-motivated CanWest Global media empire.
Schadenfreude perhaps?
Perhaps a union-controlled pension fund take-over?
I mean come-on... the stock traded in the mid-$15 range in 2006 and today? - less than a buck.
Certainly nobody wants this to happen:
seth
23-10-2008
tax cuts
Big Media's purpose is to make money only indirectly by ensuring Canada's low information voters elect Neocon governments, always contrary to their best interests. Hell 4000 of them voted NDP in a riding with no NDP candidate.
Harper's 50 billion and Campbell's billion or so in corporate tax cuts make CanWest's losses seem miniscule.
The real shame is Canwest's "journalist" sellouts like Vaughn Palmer who could have persuaded Joe Six Pack into voting for George Bush if the Harper's Neocons had switched leaders in mid election.
bpither1
24-10-2008
Vaughn Palmer is a lousy
Vaughn Palmer is a lousy example of "selling out" if you follow both his columns and his "Voice of BC" program on Shaw TV. He'll always have a job anywhere while calling the shots as he observes them since BC governments, no matter which party, are fair game if you've got the reputation for tough and well sourced journalism. What is more instructive is the self censorship practiced by those journalists of a lesser known pedigree and dubious marketable skills who comment beyond the provincial ken.
The Asper family are staunch Zionists who truck little in the way of criticism of Israel. Correct me if I'm wrong but I can not ever remember reading anything objectively critical on the misery of so many Palestinian families who suffer from the daily indignities of an occupied people.
I'll have to go to the BBC for that.
ME2
24-10-2008
Is there hope?
Perhaps there's a silver lining if the Yanks take over, since the American media will often pursue readership (profits) before ideology.
There's nothing less trustworthy than the Canadian media, and Canwest is its flagship.
Skywalker
24-10-2008
CanWest picture.
"Certainly nobody wants this to happen:" Oh yeah, and what difference would it make if it was owned by an American company. What is the difference one biased news media changed to another biased news media.
Jeffrey J.
24-10-2008
Excellent and Incisive
Welcome back Mr. Edge! Your work is ALWAYS insightful and to the point. The Tyee continues to stand for independent media as this piece demonstrates. There is precious little coverage of the owners of Canada's largest media monopolies. Asper Nation, and Mr. Edge's previous book Pacific Press, are both excellent reads.
The lesson for CanWestGlobal is well known by students of history. Pride Goeth Before Fall. Hubris. Both are well known phenomena which infect those in power and begin to warp ones judgment. The public interest aspect arises because the impact on the public of a thrashing empire can be catastrophic. If CanWestGlobal had been reigned in years ago and only allowed to own 20% (say) of the media, then their downfall would be less dangerous.
As a final comment, there is a vocal, literate and growing peace movement in Israel which is highly critical of the anti-democratic, neocon policies of the right wing ruling party in Israel. Gush Shalom is probably the most literate.
http://zope.gush-shalom.org/index_en.html
Excellent piece!
G West
24-10-2008
Canwest ....
Thanks for this Marc Edge. Thanks too to the Tyee - nice to see that the libel chill has finally thawed. Way to go.
Personally, I was kind of hoping for an employee takeover of the shards that are now left of Izzy Asper's Empire.
Reading your book would be a good exercise for anyone who thinks the phrase ‘media responsibility’ and ‘business ethics’ mean anything in this country any longer.
Sadly, the back room scheming by Izzy and his good buddy Conrad only came to light because of actions in the AMERICAN COURTS and not because of any 'independence' among Canadian journalists.
What's the point of feeling smug about it though, even though the disappearance of CanWest's dailies and their execrable Global Television 'network' of Fox News wannabees would clear the air for some real changes.
The people who'd suffer are the workers and their families - I can't get excited about that - and it sure isn't going to hurt the Aspers...
BC Mary
24-10-2008
CanWest is campaigning already. But why is G&M?
How do we understand today's Globe and Mail slavering over Campbel'sl shoes after his weird 12-minute performance on Hansard TV?
Although I hated them for it, I could grasp the Asper-controlled neo-con vision of royal raisings-up and/or off-with-their-heads of the political leaders. It's what they do. They can't help themselves.
But how do I understand today's revolting editorial in The Globe and Mail, "The Premier Who Planned Ahead"? in which every Gordo plan is a good plan? What's their objective? It's obviously intended as the launch of the provincial election campaign. But why?
Of course, BC CanWest has come truckling along in their wake applauding their Golden Boy. Stomping the Opposition. That's expected.
So today, it's been left to the readership to explain the facts of B.C. life ... after several unctious droolings by (I think) Media Monitors who, I allege, are on the BC government payroll as "Public Affairs Officers".
Is it simply the nature of rot to spread? Is there no accredited news service in Canada which can originate critical thought -- as the readers have begun to do on the Globe and Mail's weird editorial?
Shannon
24-10-2008
Lovely research, Marc
Nothing better than watching an old hack with good news judgment and clean copy turn into an academic -- it really is the best of both worlds.
But anyone who thinks American publishers would do a better job than CanWest, should be aware that a newly fashionable cost-saving measure in the U.S. is for dailies to kill their Monday editions.
In fact, I bet that will be CanWest's next cost-cutting measure, particularly in Vancouver where they could offer papers on alternate days.
Because they have the National Post to fill in the gaps and supply subscribers, they could reduce their regional papers to weeklies across the country. Perhaps maintain a hard news presence online?
Shall we open a pool on how long it will take CanWest to turn one of the Vancouver dailies into a weekly? I've got dibs on Sept 2009 in the run-up to Xmas ad sales.
G West
24-10-2008
Shannon
Canwest has already done that, kinda, in Victoria.
The Times Colonist always published every day of the year (save Christmas and New Years Day) until 2008. Now they don't publish on any day with even the slightest resemblance to a holiday...It's a toss up whether they'll ax the Monday paper or the Sunday one in Victoria.
They also had a program of providing free papers to different prospective customers (I'm not sure what the ratio was - perhaps one paper for each 15 or 20 on a suburban route) for two weeks out of every month.
That enticement to new subscribers has also gone the way of all flesh since the end of summer.
The one thing the Aspers don't seem to have tried is actually putting out some decent locally written copy more than a couple of times a month.
The one CanWest organ I do find has some quality writing in it is the NEW REPUBLIC but most Canadians don't even realize it's part of their stable....
I wonder why!
They are still doing robo-calling to ask folks to just 'try' the paper for a while...
James Burns
24-10-2008
Yay!
I have a next to impossible time sympathizing with anyone employed by CanWest. The company has relentlessly pursued an agenda of selling right-wing propaganda and blatant advertising as journalism.
So CanWest's potential downfall may come as a result of the Aspers living their ideology. You couldn't ask for a better illustration of neocon faults. But the real benefit will occur if CanWest's media outlets end along with the parent company. It will hopefully clean out a lot of the truly puerile rot that attempts to pass for Canadian journalists and journalism. Yes, that would be a happy day. I hope it comes to pass.
frank2
24-10-2008
Canwest saga one part of the
Canwest saga one part of the larger picture:virtual disappearance of classified ads to the internet, bleeding of other adverts to the "free" weekly/biweeklies and the internet, draconian cost cuts which reduce editorial staffing, and even major problems with keeping distribution efficient. (Deliveries of our subscription to the T-C have never been as eratic as at present.)
If I worked for the paper, I'm not sure I'd be interested in some sort of employee take-over, unless we could identify some more viable economic base.
Only three things keep us subscribing: (a) notices of local events, and some reporting, and (b) the fact that the editorial page has sometimes had editorials on (local) issues such as drugs and homelessness which indicate either some editorial backbone or that the Aspers aren't reading the paper, and (c) Jack Knox.
Marysue
25-10-2008
CanWaste stock!
My God, where can I buy stocks in the ASPer empire? I want to be part of a new ownership that would get to fire Palmer, Smyth, Yaffe and the whole enchilada of corporate-sucking scribes who have done nothing but give the rightwingnuts free ads to get them elected! I definitely want to fire the editors! Oh yes, indeeey:) I'm sure I have $700 left after the bath I took on RRSPs. I'll invest it all! Where do I sign up? I've never bought stocks before! Please advise! Hurry, before my RRSPs are worth nothing.
SharingIsGood
26-10-2008
Witch hunts
Isn't odd that the province, and the country can be given away with nary a peep from Aspers publishing (formerly Black's); and yet, BC citizens were subjected to months of front page and lead story naysaying and innuendo over a neighbour building a deck for a neighbour. It seems that if one is of the "wrong" political party, then he or she stands trial - both in the media and in the courts.
Bobb999
26-10-2008
Beware "bargain", value-trap stocks!
Don't forget stocks can and do go to zero, and not just penny mining stocks either.
Stockholders of many US financial institutions, including the "rescued" ones, are ending up with pennies on the dollar on their investments - if they're lucky.
Or look what happened to Air Canada shareholders a few years back. There wasn't even a general market meltdown at the time. Yet with Air Canada's bankruptcy then resurrection, shareholders ended up
with nearly zero on the dollar, as the old Air Canada became a new Air Canada owned by a new holding co. called Ace Aviation. In the process the old A.C. shares became virtually worthless.
A similar thing happened to Stelco Steel shareholders a few tears ago, when the co. was maneuvered by certain vulturous (if that's a word) greedmeisters, aided by a questionable court decision, into an unnecessary bankruptcy, at a time when steel prices were at record highs and the co. was generating profits. Stelco workers suffered too, as their jobs were threatened and pensions wiped out. Stelco was a travesty barely covered in the news.
Many a better co. than Canwest has gone to zero or near-zero. No reason then to think Canwest can avoid a similar fate, especially as we enter the worst global recession in many decades!
P.S. Why didn't I short sell Canwest? I'd be rich today...
bartoli
27-10-2008
silver lining
Sounds like the thing to do is wait until the stock gets to about 10 cents buy a $1000.00 worth and hope the Americans buy it and you could make a killing...
Bobb999
29-10-2008
10 cents?
-Not far fetched. I noticed Canwest stock closed at 93 cents a few days back, meaning it's now a penny stock -- as it deserves to be!
G West
29-10-2008
Old Media - Be Careful What You Wish For...
I won't be shedding many tears for CanWest's papers...whatever happens to them.
However, I think there's a serious side to this debate that can't be restricted to the fate of the Asper Empire.
Traditional newspapers are in a parlous state all around the world. I'm not sure, without the investigative resources and experience, not to mention the balance sheets, of traditional news organizations and their papers (tabloid and broadsheet)that the’ new’ media are up to the task of replacing them.
Without the online resources of big newspapers and their reporters and writers (which depend upon a healthy print and advertising base) what the 'internet' can provide would rapidly turn to virtual pabulum.
We need to be careful what we wish for - Canwest isn't the only 'empire' in trouble. Without good daily newspapers I think even fine efforts like the Tyee would soon be irrelevant.
geneva.b
29-10-2008
Am I the only one who tastes some hypocrisy!?
Hello Marc, not to be nasty but isn't buying CanWest stock inherently the opposite of what you're supposedly about? You came into Bob Hackett's SFU class last semester essentially reviling the evil Asper media empire and yet...you go and buy their stock!? Correct me if I'm wrong but isn't that kind of like a supposed climate change activist buying stock in GM or Toyota? Something about it seems a little hypocritical to me. Most of the class felt like you were going in for the hard sell on your book, which is not why most of us attend University, and now I am less likely to ever read your book. I don't mean to be overly critical here, but hey, that's part of why I'm a Communication Major! Apologies if I am restating anything previously mentioned, haven't had time to go through all the comments here...
ME2
29-10-2008
GWest
GWest writes :
"Without the online resources of big newspapers and their reporters and writers (which depend upon a healthy print and advertising base) what the 'internet' can provide would rapidly turn to virtual pabulum."
We can do quite well without the NYT, GWest. Advertisers will still pay (perhaps more) their writers for investigative journalism and comment on blogs or e-zines.
Though I don't get the Sun, and have only Google, the CBC Radio and the Tyee as my windows on the world, I don't feel the least bit deprived or less informed than most.
G West
29-10-2008
I'[m not so sure ME2
Without the online resources of real media companies who pay the bills we aren't going to have any professional journalist with the resources to travel the world and do in depth investigations; just think how useless google would be without the data, reporting and analysis of the news organizations that pay the bills.
I think we'd be hard pressed to be well informed with nothing but Google and the radio. We already know television news in mostly crap and pretty pictures.
I'm not saying it couldn't happen in the future, and I sure won't miss the Canwest gang - but I don't think I'd be well informed without the papers.
I read, at a minimum, the New York Times, London Times, the Telegraph, the Guardian, the Washington Post, the Los Angeles Times, the Globe and Mail and the Toronto Star on an almost daily basis. If all of those disappeared I'd still have Foreign Affairs, the New Yorker, the New York Review of Books, the New Republic, The Nation, The National Review and Atlantic - but there would be a big hole in my current information and knowledge and ability to keep up.
Maurice Cardinal
30-10-2008
Stocks Schmocks, serve the customer
I've addressed Canwest issues for almost five years in OlyBLOG.com.
One Sun reporter banned me from posting on his Olympic blog and another even sent a terse email calling me an idiot, but mostly they ignore me hoping I will go away. I always remained civil in the face of their rude phone calls and biased reporting, and although it hasn’t happened yet and it might not, I never thought their demise would come so quickly. I made a bet one year and three months ago that they would fizzle out within eighteen months, but I never "really" believed it would happen so soon. I may get that beer after all.
In retrospect, considering the lack of respect shown towards me it's not hard to understand why Canwest is taking such a beating. Apparently I’m not the only one they offended.
News has to be reported in a timely manner when a reporter learns about it. Not when it is economically viable for the publisher’s bottom line. For example, the only reason they are making an issue of 2010 Olympic security costs at this late date is because the door has long closed on discussion. Taxpayers are against the wall. Reports of security skyrocketing from $175 million to a more realistic cost somewhere in the 1 billion dollar range should have been front page headlines four years ago, not buried on page nine in the B section.
Everyone in an organization has to take ownership and accept responsibility. Accountability starts simultaneously at the top and bottom and meets in the middle.
I feel saddened that a foreign company might take ownership of such an important Canadian enterprise, but I don't feel sorry for the Aspers or most of their reporters. You reap what you sow. When you watch your colleagues publish misleading information, and you look the other way and say nothing, you deserve to go down with the ship.
You can speculate all you want Marc about high-level complex economic missteps that purportedly drove down stock prices, but at the end of the day, if a company can't deliver product, they are toast. I learned that lesson thirty years ago selling tens of millions of hit recordings to music customers one piece of vinyl and CD at a time.
If you respect and keep your customer happy you have a job for life. Insult and mislead them and you end up in the unemployment line.
Music industry executives in the late 90s insulted customers the same way the mainstream communications industry is doing today.
It didn’t work then, it isn’t working now, and it won’t work tomorrow.
All media communication companies are under the same pressure to evolve. The companies that become extinct are those incapable of change, and the one’s that fizzle first have the worst management.
As Darwin wrote, "It's not the strongest of the species that survives, nor the most intelligent, but the one with the greatest capacity for change."
Des
02-11-2008
Canwest
Interesting dialogue here. But nobody has stated the obvious -- Big is never better. Unless you want to join Conrad Black in his jail cell (however comparatively opulent it may be) or watch the Asper boys hand over their inherited wealth machine to Goldman Sachs (however many $$ they walk away with).
The ME generation has always been slow in learning the ABC's of real life.