MichaelSchmichael

How Will Arbitron Fare in This Market?

Arbitron is down over 50% since this article was posted. The question is whether, at $14-ish, there is still potential for large moves to the downside. I tend to think so, and recently opened a larger position to the south.

In its 10-Q filed November 5, 2008, the company listed $162M in total assets and $171M in total liabilities as of September 2008. The company is therefore technically insolvent by its own admission. Backing out $38M in goodwill and $1M in intangibles, the company's total liabilities exceed by almost $50M its tangible assets. This apparently has not impacted the company's ability to tap its credit lines, as Arbitron issued $125M in new LTD while paying off only $67M in existing LTD (net increase of $58M in LTD for Q3). The company is still paying its dividend, but it is not clear how much longer its lenders will keep feeding the pig.

In addition to what appears to me to be considerable balance sheet issues, Arbitron also recently lost contracts with Cumulus and Clear Channel to Neilsen. The revenue loss for this is estimated by the company as $7M in 2009 and $10M annualized. Not that big of a deal by itself, but could be indicative that the company faces individualized revenue generating headwinds on top of general market malaise.

Long puts.

How Will Arbitron Fare in This Market?

Agreed that ARB appears to be teetering on the edge. And don't forget the recent subpoena from the NYSAG. Another company I think has an attractive liquidity position (for shorts) is WXS.

Long puts in ARB and WXS.