Shareholders of Emmis Communications Corp. will vote Tuesday night at the company’s Monument Circle headquarters on whether to allow a sale to Chairman and CEO Jeff Smulyan.

But on Wall Street, the votes are leaning increasingly against Smulyan’s chances to take the radio and magazine company private.

Emmis shares lost 11 percent of their value on Monday and slid another 6 percent in the first two hours of trading Tuesday morning. The shares now can be bought for $1.65 apiece.

That’s more than 30 percent below the buyout offer of $2.40 per share, extended by Smulyan and Alden Global Capital, the New York-based private equity firm backing his bid.

Their tender offer for common shares ends today at 5 p.m. The vote will be held at a meeting at 6:30 p.m.

“Somebody’s concerned that the deal’s not going to happen,” said Mark Foster, chief investment officer at Kirr Marbach & Co. in Columbus, Ind., which does not own any Emmis shares. He said that when a company’s current trading price falls more than 12 percent of 15 percent below an offered buyout price, he starts to doubt a deal actually will be sealed.

Smulyan’s buyout bid has been threatened by shareholder lawsuits since just days after he announced his plans in April. Litigation in Marion County is ongoing, although a judge last week denied shareholders’ requests to halt the sale process until the case is resolved.

But the biggest cloud over the Emmis deal came last month when eight firms that hold Emmis’ preferred stock banded together to block the deal. Collectively they hold 34 percent of Emmis’ preferred shares.

That’s enough to prevent Smulyan from winning two-thirds approval from preferred shareholders to convert their shares into bonds—at 60 cents on the dollar—in exchange for the attractive interest rate of 12 percent.

That conversion, in addition to approval by a majority of Emmis' common shareholders, is necessary to allow the buyout to go through.

Since the preferred shareholders announced their so-called “lock-up agreement” on July 9, Emmis shares have lost 27 percent of their value, with the biggest slide coming in the past two days.

“The risk, from an arbitrage standpoint, has just gone up a bunch,” said Bob Shortle, senior managing director at Periculum Capital LLC, an Indianapolis-based investment banking firm.

Emmis spokeswoman Kate Snedeker declined to comment on the liklihood of the buyout winning approval Tuesday night.

Because Emmis’ trading volume is so thin—just 266,000 shares a day—Shortle thinks some investors are selling now instead of taking a risk that the buyout deal will fail, making it more difficult to find buyers for their Emmis shares.

“If all of a sudden, they announce this isn’t going to happen, I would expect the price to drop,” Shortle said.

Founded by Smulyan in 1981, Emmis owns 23 radio stations in the United States and publishes regional magazines in seven cities, including Indianapolis Monthly. It also operates radio stations in Slovakia and Bulgaria.

The company’s audience base has been trimmed by competition from satellite radio and iPods at the same time advertisers have funneled more dollars to the increasing number of websites and cable television channels.

Over the past four years, Emmis’ revenue has swooned by 33 percent to $243 million. Its continuing operations have wracked up losses of more than $430 million.

That performance has caused Emmis’ share price to plunge since the last time Smulyan tried to take the company private in May 2006. At that time, Smulyan’s buyout group offered $15.25 per common share, but could not come to terms with the company’s board of directors.