Newspaper Insiders Sold More Stock This Year

By: Lucia Moses Updated at 10:35 a.m. EST, Oct. 8

Where are newspaper-company stock prices headed? If insider selling activity at most public newspaper companies is any indication, share prices may have peaked and could even tumble.

That's one interpretation of an E&P comparative analysis of Securities and Exchange Commission filings for the first three quarters of 2002 and 2001. The study found insiders' net sales of stock rose in the first nine months of this year, when newspaper-company share prices hit or neared their historical highs.

In the first three quarters of this year, insiders -- such as directors, officers, and holders of 10% or more of the stock -- at 12 companies sold or planned to sell 5.68 million shares, accounting for 76.94% of trading activity. In the same period a year earlier, insiders sold or planned to sell 4.43 million shares, accounting for 71.21% of trading activity.

The newspaper companies studied by E&P have been standout stock-market performers this year, with all but one -- Dow Jones & Co. Inc. -- outpacing the Standard and Poor's 500 Index, which was down 28.99% through Sept. 30.

Heavier sales activity this year may indicate insiders believe their companies "have outperformed relative to other media -- and, because the stock has held up, it may not return as fast as other media," said industry analyst Christa M. Sober of merchant bank Thomas Weisel Partners.

The year ahead, indeed, carries a number of risks. The industry still hasn't recovered from the collapse in help-wanted classified advertising, while the steady growth in real-estate and automotive classifieds may be running out of gas. Concerns such as these recently led Merrill Lynch analyst Lauren Rich Fine to lower her 2003 forecast for newspaper ad-revenue growth to 4.0% from 4.7%, while expressing "serious concerns" that even 4.0% may be too high. Meanwhile, the price of newsprint is on the way up.

However, Thomas Russo of the Gardner Russo & Gardner investment firm, which holds shares in the McClatchy, E.W. Scripps, and Washington Post companies, doesn't interpret the high insider-selling levels as a sign they are losing confidence in the industry, "because the families aren't selling any stock." Rather, Russo contended, the activity is driven by options. "Share prices are up, options have value, and they're taking advantage of that value."

Some of the sell-offs, though, are pretty stark.

* At Gannett Co. Inc., the nation's No. 1 newspaper company by circulation, insiders sold or planned to sell 693,514 shares (78.21% of trading activity) in the first three quarters of this year, versus 245,997 shares (50.51%) in the same period a year earlier. Spokeswoman Tara Connell said that in some cases, 2002 sales were triggered by options expiring. Asked if the company's stock price was a factor in the higher level of sales of late, she said that in general, people sell for a lot of different reasons, including price. Its price hit a 52-week high of $79.90 in April.

* Belo insiders sold or planned to sell 573,432 shares (70.60%) in the first three quarters of this year, compared with 129,400 shares (55.35%) a year earlier.

* McClatchy insiders sold or planned to sell 237,590 shares (79.89%) in the first three quarters of this year, compared with 114,750 shares (62.96%) a year earlier.

* Washington Post insiders sold or planned to sell 112,562 shares (96.98%) in the first three quarters of this year, compared with 150 shares (100%) a year earlier.

Four of 13 newspaper companies studied did not fit the pattern. Insider sales activity at Lee Enterprises Inc. was higher last year, for example, due mostly to sales by then-outgoing CEO Richard D. Gottlieb.

Another special case was Dow Jones, where sales activity also was greater last year, when its share price peaked. And Pulitzer Inc. insider buys trumped insider sales this year.

For this comparison, E&P excluded data related to the Journal Register Co., a portfolio company of Warburg Pincus, which has been steadily reducing its position in Journal Register, leading to heavy sales activity last year.