What Can You Buy for Just a Penny?

A piece of bubble gum? Forget it. Those days are long past.

On the other hand, you can acquire a share of Citadel Broadcasting stock for one shiny penny. But before you call your broker, keep reading.

Citadel, the owner of ABC Radio, has seen its stock price slide from $22 a share five years ago, to one cent at today's close on the New York Stock Exchange. Radio Equalizer Brian Maloney, who has followed the company's rapid decline, notes that Citadel has been booted from the NYSE and in the future it will trade in the pink sheets, with other ill-liquid companies.

While Citadel isn't the only media company on the verge of insolvency, its downward spiral has been stunning, given the assets it controls. Citadel owns powerhouse talk radio stations like WABC in New York; Chicago's WLS, WBAP in Dallas and Washington's WMAL, to name a few. The line-up on most of those stations includes Rush Limbaugh, Sean Hannity and well-known local hosts like Mark Davis (in Dallas) and Don Wade and Roma in Chicago.

Citadel also controls a number of successful FM music stations in various markets, and syndicates such personalities as Don Imus, Mark Levin, Curtis Sliwa and Bob Brinker. With those assets, you'd think the company's stock would be trading above $.01 a share.

But you'd also be dead wrong. As Mr. Maloney recounts, Citadel's new ownership has destroyed the once-proud broadcast group, which is now hemorrhaging red ink. Making matters worse, CEO Farid Suleman managed to run off one of his most profitable stars, Sean Hannity, who signed with rival Premier Radio when his contract expired last year. Hannity's show contributed an estimated $35 million a year to Citadel's bottom line, money that has not been replaced in the company's dwindling revenue stream.

Maloney blames part of Citadel's problems on the liberal politics of the company's senior executives, which clashed with the organization's historically conservative culture--and talk radio programming. While Suleman has retained Limbaugh and Hannity on most of his stations, he has also hired personalities like Don Imus and Joe Scarborough, who are delivering mediocre ratings for key stations like WABC. In fact, much of the station's audience is delivered by Limbaugh, Hannity and Mr. Levin, who is one of the few bright spots among Citadel's syndicated hosts.

What happens next? Bankruptcy and a fire sale acquisition by another media company. In fact, don't discount the possibility of the former owner Disney-ABC, buying back their old properties. Citadel paid an estimated $1.6 billion for 22 ABC stations, various networks/music services and its syndication division just three years ago. Today, with that "penny" close on Wall Street, Citadel has a market capitalization of only $3 million.

At that price, ABC could vastly expand its radio portfolio, at a bargain basement price. The chance to acquire major market stations for pennies on the dollar doesn't come around very often, so there will be no shortage of bidders for what's left of Citadel.

With its limited radio holdings, ABC could also avoid the legal problems facing other potential buyers, including CBS and Clear Channel. Even in a deregulated industry, the acquisition of Citadel by those companies would raise monopoly concerns in some markets. By purchasing WABC and WPLJ, CBS would own seven of the top 16 stations in the nation's #1 radio market. A Clear Channel acquisition would give that company six of New York's sixteen most-popular stations.

Trading around $15 a share, Disney isn't exactly setting the world on fire. But the company is in better shape than other media conglomerates, and might be willing to reacquire its former properties. The price is certainly right.