There are times when you need to read the business pages and financial websites to understand TV.
ITV recently announced a fresh round of savings amid disappointing figures for linear advertising.
But last week was a bleak week for investors in the Scottish broadcaster and production company STV.
It’s been hit by a double whammy of falling advertising and a drop in commissions.
The share price plunged by around a third.
STV is now worth less than £60 million.
Think about this for a moment.
STV, of course, provides the Channel 3 service in most of Scotland. It is the only part of the C3 network which is not owned by ITV plc.
It’s online service – the STV Player – carries ITV 1 and much original ITV X content in the STV area where the range of material on ITV X itself is limited.
And the production business makes a significant amount of content for a whole range of broadcasters – some of it very successful – even if STV itself now provides little regional content on its own channel beyond Ofcom licence requirements.
Yet STV Group itself must surely be undervalued on the stock market just now. It is facing challenging market conditions but it is not a basket case.
The company is worth less than the amount ITV paid for UTV 10 years ago. (Remember ITV bought UTV’s TV assets – not the company itself – and the fiasco of UTV Ireland was draining the company.)
It is easy to wonder if the time has finally come for ITV to take over STV.
In general, any company with an unduly low share price is vulnerable to a takeover.
But I’m not sure if ITV is even interested.
Would the final consolidation of the C3 service really achieve that much?
Beyond a few synergies (and rebranding) would ITV get much value for its own shareholders to justify the investment?
STV and ITV now have a close working relationship again.
On the other hand, the thought that ITV X would be fully available in Scotland might appeal to the company.
In general, as long as STV is undervalued by the stock market it is potentially vulnerable – whether to an agreed bid or a hostile takeover.
I could imagine ITV being content to live with STV as a separate company unless someone else – a rival – suddenly shows an interest.
A bidding war would certainly provide some relief for STV’s shareholders.
STV was never taken over by one of the “big boys” during C3’s consolidation in the nineties and noughties. Instead it grew as a company, buying Grampian, Virgin Radio and Scottish newspapers.
The company later came close to collapse because of debt so sold most of the assets unconnected to the core TV business.
Politically, the possibility of Scottish independence in 2014 might have deterred ITV from mounting a takeover back then. Independence is now highly unlikely in the foreseeable future.
So which way will it go?
STV looks like a bargain – if the share price does not improve it looks vulnerable and any further fall may well lead to pressure from investors.
There is, however, no suggestion that the company is not viable.
The chief executive of any company has to deliver for shareholders.
Can STV’s share price – which seems unfairly low – recover? If not, might a sale to a friendly company be for the best?
Can the company really risk starting a new Scottish radio station just now? Even if it is a success, there are still start-up costs and it will take time to establish itself and break even.
I am not sure anything will happen but it will be worth keeping an eye on the business news.
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PICTURED: STV break bumper. COPYRIGHT: STV Group.