Yellow Media Inc. was again being lambasted in trading, falling nearly 19 per cent in late morning trading on Monday. The stock has been suffering a lot recently, and this recent downturn seems connected to a change of opinion by Credit Suisse. Analysts there cut their recommendation to "underperform" from "neutral", with a $2 price target, down from $5 previously.
Two dollars! The stock traded as high as $16 in 2006, when it was considered a blue-chip income trust, meaning that the stock has fallen about 86 per cent over the past five years. The opinion on the stock is overwhelmingly negative, with no analysts recommending the stock as a "buy" (10 analysts have "hold" recommendations and two have "sells").
Clearly, there are big concerns about the company's financial health and dividend payments. The yield is currently sitting at an astounding 26 per cent, suggesting that few investors believe it is going to survive much longer.
The concerns largely revolve around a recent deal by Yellow Media to sell its Trader Corp. unit for $745-million, originally expected to close at the end of this month. As my colleague David Parkinson wrote in May:
"The sale would provide proceeds to significantly dent Yellow Media's $2.1-billion debt load; without it, credit rating agencies could see fit to cut Yellow Media's debt ratings to junk levels - which, some analysts believe, would trigger stricter loan covenants that would likely force the company to reduce its common-share dividend."
So far on Monday, there has been no word from Yellow Media that the deal is in jeopardy, and the last word from the company, in May, stressed that the deal is proceeding as planned.