Down and out?

As usual I picked up the FT Weekend today and had a glance through my favourite sections. Whilst the FT is a quality weekend paper, at £2.50 a copy, I suspect it's the most expensive. At the other end of the spectrum was the Daily and Sunday Sport. Notice the past tense. On Friday Sport Media's shares (the owner of the papers) had been suspended from trading on AIM, and by the end of the day it was announced that the company was going into administration. Obviously this is sad for all shareholders and employees. I might add that I am not a holder of these shares or indeed an employee.

Whilst I still like picking up a newspaper (not the Daily or Sunday Sport I hasten to add) from time to time, people like myself are getting rarer, and it is clear that all newspaper groups will need innovative ideas and restructuring to survive in the 21st century. Sadly it appears that Sports Media couldn't adapt quickly enough with the debt burden they were carrying. Before shares were suspended they traded at about 1p, a mere fraction of the value they once held.

I mention the demise of Sports Media for the following reason. At the moment I have HMV on my monitor, and it has been there for quite a while. Shares in HMV recently fell to a nadir of 10p, but have since recovered a little to 15p. Whilst I do keep an eye out for potential recovery stocks, it most unlikely that I'll risk purchasing shares in HMV.

Just like the newspaper groups, HMV has rapidly become a dinosaur where it was once a dominant player, and to survive it really does need to reinvent itself quickly. If it does, and does it successfully then investors at these levels will be hansomely rewarded.

In 2002/2003, a company called ASHTEAD looked in desperate trouble, and I saw its shares plunge to around 2p, in fact I remember at one point you could buy shares for 1.5p and I was very tempted to take a punt. ASHTEAD did recover and over the course of the next two/three years the share price reached well over £3. Whilst I did invest in ASHTEAD, and made a very healthy profit, I didn't have the nerve to risk a punt at 1.5p. If only I had. £1000 invested would have ballooned to over £200,000 within a very short time frame.

However, ASHTEAD's recovery didn't depend on the company reinventing itself, and hence when better times arrived the business thrived. HMV is a totally different kettle of fish. For it to survive it effectively needs to offer a different service. For this reason I'll probably never take the gamble.

On a different note, I see that China Shoto was one of the week's star performers. I don't know anything about the company, but according to the short article in the FT, they are delisting and offering shareholders £3.80 per share. This is exceedingly refreshing news since the offer is not far short of CHNS's all time high (from a brief look at the chart). Normally when companies decide to de-list shareholders either have to hold shares in an illiquid private company, sell out at very low prices before the company delists or are made a derisory offer. What a nice change to see shareholders getting a fair (even generous?) offer. However, surely this should be the norm and not an exception.

Happy hunting.