David,
I, for one, enjoy the Penton posts. I'm definitely rooting for them as well. It's a mighty deep hole to dig out from, but there's something to be said for a challenge like that. Someone who contributes to the turn around of an operation like that has accomplished more than someone who has been part of a success like say Hanley Wood. No disrespect to anyone at HW, as I have the utmost respect for their business (and I think Mitch Rouda is quite possibly the smartest B2B eMedia person in the business). However, it's easier to take something good and make it great than it is to take a disaster and clean it up. Penton is the Katrina of B2B Publishing. So, to all of you over at Penton digging it out, hats off and good luck.
Prescott:
Thanks for the kind words. I second your wishes to the troops at Penton, and love your metaphor.
May Penton, and New Orleans, rise again.
David
Dave,
I enjoy your view on Penton's results and its continuing recovery from the over investment in the technology media industry prior to the collapse of the dotcom economy.
You correctly point out that the board of directors has a fiduciary responsiblty to all the shareholders, including the common shareholders. You also mention the potential of a shareholder suit if there is the perception of an apparent conflict of interest between the preferred shareholders, who control the board, and the common shareholders. This is a real concern and the board, I am sure, is well aware of their fiduciary responsiblities and will be careful to make any decisions with their duty to care for all shareholders.
The one other point that you do not mention is that several major events, including a sale of the company, would require an affirmative vote among all the shareholders of the company. The common shareholders control the votes of the company.
The most likely scenario for the preferred shareholders to liquidate their position would be a sale of the company, which would require a positive vote of the commnon shareholders. It would be unlikely that the common shareholders would agree to any sale that would not take into account their own financial interests. This reality provides a certain value to the common shares that would exceed the negative intrinsic value of the common shares.
The preferred shareholders have the right to agree to any modification of the value of their position that is in their best interests to achieve their own finacial return goals.
The point is that there likely will be some value to the common shares at exit, either as a result of the improving financial performance of the company, a modification of the preferred shareholders financial rights under the preferred shareholder agreement, or some combination of both.
Penton has continued to improve its financial performance, or growth in EBITDA, since the nadir in 2002. The underlying business is solid, but its capital structure continues to be out of line with the scale of the company today. A transaction for the company would require a recapitalization of the company, and a balance sheet that could be comfortably supported by the current financial performance.
I enjoy reading your blog, Dave.
Regards, Tom
Tom:
Thank you for the clear analysis and explanation. As you point out, the shame in all this is that Penton's problem is one of capital structure, not underlying performance, which continues to improve.
I'll hang on to the Penton shares I have, and will continue to root for the success of the company, its employees and executives. There are many good media products in the company, and they deserve to thrive.
David
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