The McClatchy Stock Repurchase, Research Paper Example

In August of this year, the McClatchy Company engaged in a major repurchase of its own stock, with the Board of Directors authorizing repurchase options going to $15 million, with a deadline set at the end of 2016. McClatchy has long been a major media outlet and publisher, operating media companies in 14 states and publishing resources such as The Miami Herald and The Charlotte Observer (McClatchy Company).  Nonetheless, the company has in recent years suffered major setbacks on the stock exchange. This in turn goes to a definite motivation on the company’s part to initiate the repurchase options. In plain terms, McClatchy was threatened with a delisting on the New York Stock Exchange (NYSE), and because its share price had averaged at below one dollar for over 30 days; under such circumstances, the Exchange is entitled to delist any company, so McClatchy clearly chose to respond with a strategy potentially going to enhancing share value and securing, at least for the immediate future, the company’s presence in the market. The Exchange also permits up to six months for a company to address the issues and manifest higher share prices (Edmonds).  Even as company spokesman Ryan Kimball declined to comment on the tactic, it seems evident that the threat of delisting was a primary motivation in the Board’s decision.

A further motive of McClatchy may be perceived through noting the company’s efforts to cut costs.  More exactly, the stock repurchase is intended to boost confidence in McClatchy, which will be enhanced by the company’s evident efforts to downsize and address its economic issues.  In examining the company’s own site, there is the impression that McClatchy is struggling to adapt to the digital age, whereas its former success was based on print media.  To that end, it is reported that McClatchy is considering closing down its five foreign bureaus, and CEO Pat Talamantes is evidently open to further means of streamlining expenses and cutting costs: “’This is typically happening newspaper-by-newspaper as they are dealing with challenges in their own markets’” (Edmonds).  At the same time, Talamantes expresses confidence in McClatchy’s ability to buy into new digital markets, even as he remarks upon the repurchase agenda as enabling such ventures: “”As we have reviewed our strategies for investing in digital ventures, our stock price presents us with an attractive opportunity to invest in our growth markets’” (McClatchy Company).  While the above statement is taken from a company press release and consequently tailored to be highly positive, there remains the reality that the repurchase strategy is viewed as essential to McClatchy’s future standing in the media industry.

With regard to the public and market response to the McClatchy maneuver, there was an almost immediate and favorable reaction. The repurchase program was announced on August 19 of this year; by the 31^st, the stock was trading at $1.26 per share, which represented a gain of 23.5 percent within the prior three trading days (Edmonds).  There is of course no guarantee that a trading momentum will continue, and the reality exists that even the stock value increase must be compared to how McClatchy was trading at over two-thirds of these figures at the start of the year. Moreover, the company’s “cautionary statement” in its press release makes it clear that McClatchy understands the uncertainty inherent in relying upon a repurchase program at this scale.  The doubt is justified; as of September 25, McClatchy stock was closing on the NYSE at $1.05 per share, only minimally above the cut-off point for delisting (Marketwatch.com).  As the year draws to a close, then, it seems that McClatchy’s repurchase strategy has been at least partially effective, and has “bought the company time” in which to better secure its NSE standing through cutting costs and investing in digital media.  Certainly, public and market response to the repurchase option has not gone to a dramatic reversal of McClatchy’s fortunes. At the same time, it appears that the strategy was necessary, in terms of at least marginally improving the value of the shares and promoting a degree of increased confidence in the company.

Works Cited

Edmonds, Rick. “Financial maneuvers bring McClatchy share price back up.” Poynter, Media Wire. 31 Aug. 2015. Web. 25 Sept. 2015.

Marketwatch.com. McClatchy Co: NYSE MNI.  25 Sept. 2015. Web. 25 Sept. 2015.

The McClatchy Company. “McClatchy Announces Stock Repurchase Program.” 19 Aug. 2015. Web. 25 Sept. 2015.