Why We Can't Have Quality News Journalism

 The Omaha World Herald, a regional daily newspaper, is owned by Lee Enterprises.  A number of other Nebraska-based daily newspapers are also owned by Lee.

On November 24, the following article came out: Lee Enterprises approves 'poison pill' in face of buyout offer | Omaha State and Regional News | omaha.com:  

Lee Enterprises said Wednesday that it had approved what’s known as a “poison pill” to guard against a hostile takeover as it considers New York hedge fund Alden Global Capital’s unsolicited purchase offer....The plan approved by Lee Enterprises’ board would kick in if Alden gets control of 10% or more of Lee’s stock in the next year. At that point, other shareholders could buy shares at a 50% discount or get free shares for every share they already own. Flooding the market with additional shares would dilute the stock, making it more expensive for Alden to acquire a controlling stake. Alden said in a filing Tuesday that it owns 6.1% of Lee."

"...Lee Chairman Mary Junck said the plan would give the board and shareholders time to consider Alden’s proposal “without undue pressure while also safeguarding shareholders’ opportunity to realize the long-term value of their investment.... Alden, which has become one of the country’s largest newspaper publishers through a series of acquisitions in recent years, offered Monday to buy Lee for $141 million, or $24 per share. That was 30% higher than its value at market close Friday.""...Alden’s titles include the Chicago Tribune and the Baltimore Sun, which it acquired this summer in its takeover of Tribune Publishing." (maybe Jim P. has heard more about the acquisition of the Chicago Tribune?)

Read on for more information on the secretive, pervasive hedge fund, Alden Global Capital:

The following article by McKay Coppins appeared in the Atlantic Magazine, October 14, 2021.

"Spend some time around the shell-shocked journalists at the Tribune these days, and you’ll hear the same question over and over: How did it come to this? On the surface, the answer might seem obvious. Craigslist killed the Classified section, Google and Facebook swallowed up the ad market, and a procession of hapless newspaper owners failed to adapt to the digital-media age, making obsolescence inevitable. This is the story we’ve been telling for decades about the dying local-news industry, and it’s not without truth. But what’s happening in Chicago is different."

"In May, the Tribune was acquired by Alden Global Capital, a secretive hedge fund that has quickly, and with remarkable ease, become one of the largest newspaper operators in the country. The new owners did not fly to Chicago to address the staff, nor did they bother with paeans to the vital civic role of journalism. Instead, they gutted the place."

"Two days after the deal was finalized, Alden announced an aggressive round of buyouts. In the ensuing exodus, the paper lost the Metro columnist who had championed the occupants of a troubled public-housing complex, and the editor who maintained a homicide database that the police couldn’t manipulate, and the photographer who had produced beautiful portraits of the state’s undocumented immigrants, and the investigative reporter who’d helped expose the governor’s offshore shell companies. When it was over, a quarter of the newsroom was gone."

"...But outside the industry, few seemed to notice. Meanwhile, the Tribune’s remaining staff, which had been spread thin even before Alden came along, struggled to perform the newspaper’s most basic functions....Longtime Tribune staffers had seen their share of bad corporate overlords, but this felt more calculated, more sinister."  

Charlie Johnson, a former Metro reporter, had this to say:  “They call Alden a vulture hedge fund, and I think that’s honestly a misnomer,” Johnson said. “A vulture doesn’t hold a wounded animal’s head underwater. This is predatory.”

"...Of course, it’s easy to romanticize past eras of journalism. The families that used to own the bulk of America’s local newspapers—the Bonfilses of Denver, the Chandlers of Los Angeles—were never perfect stewards. They could be vain, bumbling, even corrupt. At their worst, they used their papers to maintain oppressive social hierarchies. But most of them also had a stake in the communities their papers served, which meant that, if nothing else, their egos were wrapped up in putting out a respectable product."

"...What threatens local newspapers now is not just digital disruption or abstract market forces. They’re being targeted by investors who have figured out how to get rich by strip-mining local-news outfits. The model is simple: Gut the staff, sell the real estate, jack up subscription prices, and wring as much cash as possible out of the enterprise until eventually enough readers cancel their subscriptions that the paper folds, or is reduced to a desiccated husk of its former self....The men who devised this model are Randall Smith and Heath Freeman, the co-founders of Alden Global Capital. Since they bought their first newspapers a decade ago, no one has been more mercenary or less interested in pretending to care about their publications’ long-term health. ... these papers don’t have to become sustainable businesses for Smith and Freeman to make money.... So far, Alden has limited its closures primarily to weekly newspapers, but Doctor argues it’s only a matter of time before the firm starts shutting down its dailies as well."

"...This investment strategy does not come without social consequences. When a local newspaper vanishes, research shows, it tends to correspond with lower voter turnout, increased polarization, and a general erosion of civic engagement. Misinformation proliferates. City budgets balloon, along with corruption and dysfunction. The consequences can influence national politics as well; an analysis by Politico found that Donald Trump performed best during the 2016 election in places with limited access to local news."

"...Alden now controls more than 200 newspapers, including some of the country’s most famous and influential: the Chicago Tribune, The Baltimore Sun, the New York Daily News. It is the nation’s second-largest newspaper owner by circulation. Some in the industry say they wouldn’t be surprised if Smith and Freeman end up becoming the biggest newspaper moguls in U.S. history.  ...They are also defined by an obsessive secrecy. Alden’s website contains no information beyond the firm’s name, and its list of investors is kept strictly confidential. When lawmakers pressed for details last year on who funds Alden, the company replied that “there may be certain legal entities and organizational structures formed outside of the United States.”

I have posted before on the effect of vulture capital hedge funds on my state. There was Jana Partners which forced the sale of Con Agra foods, and Elliot Associates, which engineered a hostile takeover of Cabella's sporting goods by acquiring 11.1% of shares.  Especially with the Cabelas takeover, a community was economically devastated and over a thousand people lost their jobs.

Real vultures have a useful place in the ecosystem, but vulture hedge funds are the seamy side of capitalism and it's hard to see that they benefit anyone but themselves.