Salem Media Group stands to save $1.2 million annually by pulling its stock from the Nasdaq Global Market and deregistering the Class A shares with the Securities & Exchange Commission. Noble Capital Research Director Michael Kupinski does the math in a new company-sponsored research report, entitled “Salem Media Group Taking Serious Steps To Reduce Costs.” Last Friday, the Christian and conservative-centric media company announced plans to voluntarily delist its Class A common stock from the exchange. Salem’s final trading day on Nasdaq will be on or about Jan. 18 before it shuttles its shares over to the OTCQX or another OTC market around Jan. 19, pending approval by OTC Markets.
Not having to publish a quarterly 10Q report and host quarterly investor calls will save Salem millions of dollars in the long run. And the delisting will impact only a small group of stakeholders: Salem has only one bondholder and roughly 300 shareholders.
The decision to voluntarily exit Nasdaq was an about face from the company’s earlier plans to stay the suspension of its shares from being delisted. It was made after Nasdaq warned the broadcaster that it was in danger of being delisted for not complying with the stock exchange’s $1 minimum bid price requirement. On June 23, 2023, Salem was given the customary compliance period of 180 calendar days to get back into Nasdaq’s good graces by achieving a minimum bid price of $1.00 per share for at least ten consecutive business days. On Dec. 22, 2023, the stock exchange told Salem that it had not regained compliance and that its stock was scheduled for delisting on Jan. 3, 2024. On Dec. 26, Salem filed a hearing request to stay the stock’s suspension. But later that day, the company had a change of heart.
“Subsequent to submitting the hearing request, on December 26, 2023, after careful evaluation of the options available to the Company, the Company’s board of directors determined that the voluntary delisting of the Company’s Class A Common Stock from Nasdaq is in the best interests of the Company and its stockholders,” Salem said in an updated press release issued Dec. 29 at 6:45pm ET, more than six hours after issuing its original release on the decision. “The Company anticipates significant financial savings as a result of this decision. In addition, delisting and deregistration provide several benefits to the Company and its stockholders including lower operating costs and reduced management time commitment for compliance and reporting activities.”
Prior to the delisting decision, Salem was contemplating other moves including a reverse stock split, where each outstanding share of the company is converted into a fraction of a share. The maneuver has been used by other broadcasters, including Audacy and Cumulus Media, but the results have been mixed.
Salem ultimately decided against such a move.
“We believe that lowering operating costs to improve cash flow, which can be used to more aggressively lower debt was a significant contributor to the decision,” Kupinski writes.
But there is a caveat. The delisting decision “will create some very near term pressure on the shares given that some investors may not be able to own shares of a company that is delisted and non registered with the SEC,” Kupinski adds. “We believe that the company is making hard decisions to improve its financial profile and position the company for improved long term shareholder value.”