Emmis executive high on company's outlook, despite NASDAQ threat

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An executive of Emmis Communications Corp. is optimistic the company's performance will improve enough to boost its stock price above $1, eliminating the threat of being delisted by NASDAQ.

NASDAQ notified Emmis Sept. 21 that its shares no longer will trade on the stock exchange if they don’t reach the minimum bid price of $1 by March. Shares of the company, which opened Monday at 79 cents, haven’t traded above the $1 level since September 2008.

But Patrick Walsh, Emmis’ chief operating officer and chief financial officer, thinks the stock is showing signs of life after bottoming out in July at 24 cents.

“We’re actually hopeful through our own operating performance that our stock will continue to rise, and the situation will remedy itself,” he said.

Emmis and many other broadcasters have been weighed down by a heavy debt , falling advertising revenue and the perception that radio is a passé medium.

Doug Ferber, a Dallas-based national media broker, agreed with Walsh and said an economic recovery alone might be enough to push the stock over the benchmark.

To avoid delisting, Emmis shares would need to trade above $1 for 10 consecutive business days before March 15.

“A lot can happen between now and then in the economy,” Ferber said. “[Emmis doesn’t] have to do anything and still be over a buck.”

A reverse split may help the company avoid a delisting because each share would be worth more. But investors would also own fewer shares, leaving the total value of their holdings unchanged.

In a one-for-10 reverse split, for instance, an investor holding 100 shares valued at 50 cents apiece would end up with 10 shares valued at $5 each.

Walsh acknowledged the company could move quickly to take “alternative measures” should the stock languish for too long but declined to be more specific.

Steve Dutton, a partner at the Indianapolis-based Barnes & Thornburg LLP law firm, said a reverse split could be inviting but warned that it also can make a company less attractive to potential shareholders.

“You get fewer and fewer shares in the hands of individuals as you go through these splits,” he said. “If you have 10 shares outstanding, who wants to trade in that?”

Should Emmis fail to meet NASDAQ’s demand, its stock would be relegated to penny-stock status on the over-the-counter bulletin board.

Emmis still could appeal any decision to delist its shares, however.

Emmis has faced financial difficulties recently. It reported a quarterly profit in July, but only after buying back a big chunk of its own debt on the cheap. The company turned a profit of $7.5 million for the fiscal first quarter ended May 31, compared with a loss of $1 million a year earlier.

The company is set to report fiscal second quarter earnings Oct. 9.

“Emmis is pretty much your average radio company today,” Ferber said. “I could go through a long list of radio companies, public and private, that have leverage issues. It’s commonplace.”

Despite challenges from iPods and satellite radio, traditional radio still reaches 235 million listeners a week and is capable of generating profit margins of about 40 percent, Ferber said.

Several radio companies posted double-digit percentage gains in their stock prices through the first two quarters of the year. Emmis shares rose 37 percent. Broadcasters are hoping to get an additional boost from the installation of FM transmitters in Apple iPods.

“We’ve cut costs and have new revenue drivers,” Walsh at Emmis said. “The good news is that the fallout and fragmentation [from the recession] is beginning to stabilize.”

Emmis operates local radio stations WIBC-FM 93.1, WLHK-FM 97.1, WYXB-FM 105.7 and WFNI-AM 1070.


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