Why Central European Media Popped
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of media and entertainment company Central European Media Enterprises (NAS: CETV) spiked as much as 28% following the announcement of fresh financing.
So what: As part of the agreement, Time Warner Cable (NYS: TWC) will loan Central European Media $300 million that it will use primarily to retire debts coming due in 2013. In addition, Time Warner and billionaire investor Robert Lauder will pay $86.4 million for 11.5 million shares of Central European Media -- a 5% discount to yesterday's closing price. This new deal gives Time Warner a 40% stake in Central European Media and offers the possibility of increasing that stake as high as 49.9% in the future.
Now what: Investors can breathe a little easier knowing that the company's immediate cash crunch is off the table with the Time Warner loan, but it doesn't address the fact that advertising growth simply hasn't come back as quickly as Central European Media had expected. Until it can show meaningful bottom line growth, I'd just assume pass even with the stock relatively close to a 52-week low.
Craving more input? Start by adding Central European Media to your free and personalized watchlist so you can keep up on the latest news with the company.
At the time this article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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