Is Cumulus the Most Financially Irresponsible Company in Media?
In this clip segment fromMarket Foolery, Chris Hill andSimon EricksondiscussCumulus Media (NASDAQ: CMLS)and the other side of penny stocks. Shares of Cumulus are down nearly 90% in the past year, now trading at approximately $0.30 per share. Oddly enough, the company found it fitting to reward the CEO for this steep decline with a seven-figure bonus.
What's going on here? And speaking of penny stocks, are they ever worth buying?
A full transcript follows the video.
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This video was recorded on May 4, 2017.
Chris Hill:I don't know if we've ever talked about this radio company before, butwe've talked aboutSirius XM. There are a lot ofpublicly traded radio companies. If you drive around in your car and you'relistening to a radio station, andcertainly if you're a Sirius XM subscriber,you know who they are, but you'll heariHeartMedia,Salem Media,Cumulus Media,andyou'll hear, once they do the call lettersand that sort of thing, they'll say, "WXYZ, a Cumulus Media station."
Cumulus is the oneI want to talk about, becausethis is one of the biggest radio companies inAmerica. They own more than 450 stations.Robert Feder is a guy who hascovered the media in Chicago for decades, and hewrote about something earlier this week thatcaught my attention, which was, Cumulus waslaying off some people in Chicago. WLS is a huge station there,and they have others as well, butthat's the big, heritage, best-known station. I thought, "That's odd,why are they laying people off?"I'm pretty sure their CEOrecently got a bonus. AndI looked it up, and this is something I tweeted earlier in the week, and I felt like ... I'll get to why we're talking about it in a second. Here's the deal with Cumulus Media. CEO Mary Bernerearlier this year got a seven-figure bonus. Shares of Cumulus media down 89% in the last 12 months. Not really sure why she got that bonus. It'scertainly not based on stock performance. Speaking of the stock, shares of Cumulus Mediatoday trading for$0.27 a share. Not $27,$0.27.
Ourcolleague Matt Argersingerpointed out that just a few years ago, Cumulus stock wastrading around $60 a share. Today,$0.27.I bring this up, because we get asked this questionas frequently if not more frequently than any other, in terms of, "What do you think about _____ industry stocks?" Over the last year,I would say the question we get more often than others ismarijuana. What do you think about marijuana stocks? And our answer isfrequently, stay away for now,because there's nothing legal on a federal level, and oh,by the way, they're penny stockspretty much across the board.I just wanted to remind people that there are other penny stocks out there that are, on the surface, appear to be large, stable companies. You'dabsolutely be forgiven for thinking Cumulus Media,with all of its stations,all of its assets, is a really stable business.$0.27 a share. How much money do you have in your pocket?
Simon Erickson:Acouple shares worth, at least.
Hill:Apparently. Yeah.I wrote onTwitter, I think this might be -- just my two cents -- the mostfinancially irresponsible radio companyin the industry. I might have to broaden that to,this might be the most financially irresponsiblecompany in all of media.
Erickson:Quite a statement, Chris.
Hill:[laughs] Ididn't ask any questions to you,other than what you have in your pocket. Yeah,we talk about marijuana stocks, weget that question all the time. We love whenpeople look around and see trends and start that investorpart of their brain working. Andit's a great question to ask. But I just wanted to remind people, there are other penny stocks out there.
Erickson:I think that'sreinforcing why we always lookat the long-term. It's not enough to just say, "There's a hot new industry, the marijuana penny stock industry, we'regoing to make a ton of money." Youhave to find a business thatexecutes well and has a viable business behind it that'sgoing to carry you to long-term returns. There'sno doubt about that. We continue to stress that. It'sthe same thing we've always saidfor the Motley Fool, perfect example right there.
Chris Hill has no position in any stocks mentioned. Simon Erickson has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool has a disclosure policy.