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Is Cumulus the Most Financially Irresponsible Company in Media?

By Motley Fool Staff – May 10, 2017 at 10:18AM

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One of the biggest radio companies in the country . . . and a penny stock.

In this clip segment from Market Foolery, Chris Hill and Simon Erickson discuss Cumulus Media (CMLS -1.49%) and the other side of penny stocks. Shares of Cumulus are down nearly 90% in the past year, now trading at approximately $0.30 per share. Oddly enough, the company found it fitting to reward the CEO for this steep decline with a seven-figure bonus.

What's going on here? And speaking of penny stocks, are they ever worth buying?

A full transcript follows the video.

This video was recorded on May 4, 2017.

Chris Hill: I don't know if we've ever talked about this radio company before, but we've talked about Sirius XM. There are a lot of publicly traded radio companies. If you drive around in your car and you're listening to a radio station, and certainly if you're a Sirius XM subscriber, you know who they are, but you'll hear iHeartMediaSalem Media, Cumulus Media, and you'll hear, once they do the call letters and that sort of thing, they'll say, "WXYZ, a Cumulus Media station."

Cumulus is the one I want to talk about, because this is one of the biggest radio companies in America. They own more than 450 stations. Robert Feder is a guy who has covered the media in Chicago for decades, and he wrote about something earlier this week that caught my attention, which was, Cumulus was laying off some people in Chicago. WLS is a huge station there, and they have others as well, but that's the big, heritage, best-known station. I thought, "That's odd, why are they laying people off?" I'm pretty sure their CEO recently got a bonus. And I looked it up, and this is something I tweeted earlier in the week, and I felt like ... I'll get to why we're talking about it in a second. Here's the deal with Cumulus Media. CEO Mary Berner earlier this year got a seven-figure bonus. Shares of Cumulus media down 89% in the last 12 months. Not really sure why she got that bonus. It's certainly not based on stock performance. Speaking of the stock, shares of Cumulus Media today trading for $0.27 a share. Not $27, $0.27.

Our colleague Matt Argersinger pointed out that just a few years ago, Cumulus stock was trading around $60 a share. Today, $0.27. I bring this up, because we get asked this question as frequently if not more frequently than any other, in terms of, "What do you think about _____ industry stocks?" Over the last year, I would say the question we get more often than others is marijuana. What do you think about marijuana stocks? And our answer is frequently, stay away for now, because there's nothing legal on a federal level, and oh, by the way, they're penny stocks pretty much across the board. I just wanted to remind people that there are other penny stocks out there that are, on the surface, appear to be large, stable companies. You'd absolutely be forgiven for thinking Cumulus Media, with all of its stations, all of its assets, is a really stable business. $0.27 a share. How much money do you have in your pocket?

Simon Erickson: A couple shares worth, at least.

Hill: Apparently. Yeah. I wrote on Twitter, I think this might be -- just my two cents -- the most financially irresponsible radio company in the industry. I might have to broaden that to, this might be the most financially irresponsible company in all of media.

Erickson: Quite a statement, Chris.

Hill: [laughs] I didn't ask any questions to you, other than what you have in your pocket. Yeah, we talk about marijuana stocks, we get that question all the time. We love when people look around and see trends and start that investor part of their brain working. And it's a great question to ask. But I just wanted to remind people, there are other penny stocks out there.

Erickson: I think that's reinforcing why we always look at the long-term. It's not enough to just say, "There's a hot new industry, the marijuana penny stock industry, we're going to make a ton of money." You have to find a business that executes well and has a viable business behind it that's going to carry you to long-term returns. There's no doubt about that. We continue to stress that. It's the same thing we've always said for the Motley Fool, perfect example right there.

Chris Hill has no position in any stocks mentioned. Simon Erickson has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool has a disclosure policy.

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