GateHouse Media is the youngest of the newspaper public companies, debuting with a successful initial public offering in October 2006. This week it joined Journal Register in the worst that can happen to a stock, falling so far, below $1 a share, that the New York Stock Exchange took it off the trading floor.

 

The company can still trade as a "pink sheet" penny stock and work back to regular status if its share price rises. More often, though, negative momentum drives the stock even lower, and delisting becomes final after 30 days. Journal Register was trading at 13 cents a share Friday noon.

 

The company's short, unhappy life sheds light on three current industry issues. GateHouse is a collection of roughly 100 small and mid-sized dailies and more than 400 weeklies and shoppers. As several listeners to my Poynter webinar Wednesday asked, aren't these smaller papers doing much better than metros?

 

Well, yes. GateHouse's most recent quarterly report shows revenues off 4 percent year to year on properties it had owned that long. Not bad, with many companies reporting double-digit declines for the period. And expenses were down 5 percent.

 

The trouble is elsewhere. Besides focusing on smaller papers (it already owned a number as privately-held Liberty Media), GateHouse had an initial strategy of paying a high dividend -- $1.60 a year versus a stock price of about $20 a share -- a robust 8 percent. 

 

The company has cut the dividend three times but still paid out 20 cents a share for the first quarter in April. If you thought the share price would hold steady at $1 and the company could continue dividends at the current level, you would have annual return of 80 percent. Neither seems likely, though.

 

Strategy three that GateHouse might want back was to continue to acquire papers aggressively well into last year. So it faces the Sam Zell/Tribune problem with fewer zeros -- how to earn enough to pay interest and keep peace with lenders.

 

By my reading of the first quarter earnings release, GateHouse paid $23 million in dividends and $24 million in interest with operating earnings of $30 million. Management discussion of the results does mention a silver lining: The company sold $9.4 million in "non-strategic properties," including real estate, and has identified $35 million more for sale.

 

That could get things back to even for a quarter or so -- but remember the second quarter revenue declines announced by companies that announce monthly results have been considerably worse than those of the first.

 

Not surprisingly, GateHouse was the subject of two scathing analyst reports in the last 10 days. One put the value of the company at zero. Wall Street had gotten the drift already taking the stock's value down from $9 a share in February to $3 last Thursday and $1 Friday.

 

This is plenty bad news, but perhaps not quite so bad as it sounds for those working at GateHouse papers (the biggest are the Journal Star of Peoria, Ill., and The Repository of Canton, Ohio). The papers, at least most of them, are still making money, so they should be worth running even if GateHouse breaks up under the current pressures.

 

GateHouse management has been close-mouthed in the best of times, and the company did not comment on either the analysts' reports or the suspension of floor trading.