Alden Global Capital more than doubled its stock ownership in Davenport-based Lee Enterprises this week.
Lee — the parent company of The Courier — operates in 77 markets, after its purchase of Warren Buffett's Berkshire Hathaway Media Group's holdings earlier this year.
According to U.S. Securities and Exchange Commission filings, MNG Enterprises Inc., the business name for Alden, purchased 4,099,700 Lee shares this week for about $10 million, which equals about 7.1% of the company.
Alden now owns 13% of Lee’s available shares.
Lee Enterprises officials declined to comment on the purchases.
Alden also recently increased its ownership stake in Tribune newspapers, and through its majority ownership of Digital First Media, owns more than 50 daily newspapers. It has gained a reputation of aggressive cost cutting and staff reductions and was once called “a destroyer of newspapers" in The New York Times.
It is expected it will further increase its ownership in Tribune newspapers this summer.
Rick Edmonds, media business analyst at the Poynter Institute, said Alden's move with Lee could mean different things.
“They may buy more and try to either get some control of the company or force a sale; that seems to be the scenario with Tribune Publishing,” he said. “It’s kind of a win-win (for Alden) in that in one scenario they take over the company and run it the way they want to, pare it down … or if somebody else comes in and buys it, that would probably be at a premium.”
Or Alden could buy up more shares to drive up the stock price and “get a nice gain on their investment. At least in theory it’s a win-win for them, although not necessarily for Lee," he said.
The purchase comes soon after the New York Stock Exchanged warned Lee it could face a downgrade because its stock price fell under $1 for more than 30 days. The stock remained under a dollar from March 31 until it climbed to $1.00 at the end of trading on May 21, and has remained above $1 since.
Lee Enterprises also has yet to file financial documents related to its second fiscal quarter performance, which are due by June 22.
Edmonds said Alden’s purchase this week also might be because Lee’s stock was “extremely cheap.”
Another element, which Edmonds said is hard to prove, could be Alden is shorting Lee’s stock. An investor shorts a stock by borrowing shares from their brokers and selling them, hoping to buy back the shares and return them once the company’s stock price declines. The difference between the price at which they sold and the lower purchase price would be their profit.
A short-seller who borrowed Lee shares, sold them at $300, and then bought them back at $200, would make a $100 gain, for example. But if the stock rises above the initial sales price, the short-seller would be sitting on a loss that could keep increasing if the stock continues to go up.
“There’s particular volatility brought in if short-sellers are influencing the price,” Edmonds said. “They could take positions without putting a ton of money in play because the stock is so cheap.”
There is a third possibility behind Alden’s purchase, but Edmonds didn’t think Alden having a 13% stake in Lee would be enough to force the issue. That’s a bankruptcy filing.
“I don’t think their holding is enough to really push for this, (but it) would be bankruptcy with the idea that they could buy the company out of bankruptcy, and there’s certainly been some speculation that bankruptcy could in the cards for Lee,” he said.
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