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Saturday, July 15, 2006

Comedians and "Penron" 

A commentator to my recent post on the Penton sale possibility, signing himself "Nussbum," asks the question: "Penron?"

Normally, I'd simply delete a comment like that, but the more I thought about it, the more I felt the need to respond.

My comedian-commentator may have coined a neat little term for what's happening at Penton, but I think it's wrong. Sure, the preferred shareholders stand to be made whole, with a nice profit, if a sale is completed. And sure, the common shareholders (of which I am one) are looking at the very short end of the stick.

But Penton is no Enron. Many of us applauded the company's efforts to remake itself from a "smokestack industry" publisher into an Internet player, back in the days when that seemed to make a lot of sense. So we bought shares, anticipating ludicrous payouts. And many more of us lost money, not only on Penton, but on other Internet-bubble related stocks--mainly because we helped create that same bubble through our expectations of instant wealth.

It's easy in hindsight to condemn the Penton strategy, but at the time, we all know we thought it was a good, if not brilliant, approach. And unlike Enron, the company wasn't using smoke and mirrors to create value--it was buying legitimate companies and executing on a legitimate strategy.

And it's easy to condemn the deal the preferred shareholders have. But as I recall, they stepped in with substantial capital at a time when Penton's very existence was in doubt. Sure, I'd like to pull some money back out of Penton in a sale--and I think the preferred shareholders will do the right thing by common shareholders in the end--but I took the risk, and held the shares.

And finally, I'd like to point out to "Nussbum" that Penton CEO David Nussbaum has done what looks like a pretty terrific job of resuscitating the operating elements of the company. Sure, the crushing debt load is still crushing, and the company's performance isn't going to be able to dramatically reduce that debt anytime soon. But within the tight confines of being able to make no mistakes, Nussbaum and his team have stabilized the financial performance of Penton, and that's no small feat.

None of this is to say that I'm particularly happy with the potential sale of Penton, and it's potential to cause further erosion in the Shaw family net worth (though not all that much, thankfully). But I bought in and stayed in with my eyes wide open.

If you have a different view, feel free to comment away!


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