UPDATE: Osmium has kept buying. In an Oct 5 filing, the US firm revealed it had lifted its stake in NZME to 13.3 per cent.
San Francisco-based Osmium Partners had been watching NZME for three years before it decided to invest, founder and managing partner John Lewis says.
A Monday NZX filing revealed that on September 1, Osmium crossed the mandatory disclosure threshold. It had built an 8.8 per cent stake over a series of trades, buying shares at prices between 25c and 40c.
NZME - publisher of the NZ Herald - was at 44c in midday Friday trading, valuing the company at $86.5 million, and Osmium's stake at $7.6m.
So what led the investment management firm to finally pull the trigger and buy close to 9 per cent of the media company?
"Coming into the fourth quarter, I thought this would be a very rough time, but NZME pivoted rapidly and pulled out a win," Lewis says.
"Ebitda was up, and it was guiding to more profit in 2021."
On August 25, NZME reported a 5 per cent increase in operating earnings to $28.9m as rapid restructuring efforts and new online initiatives including premium subscriptions (which doubled in the six months to June 30) and OneRoof, helped to offset Covid-19's impact on advertising. The board said dividend payments could resume after June 30 next year. Shares jumped 48 per cent in a session to 42c.
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"A lot of great businesses are built in times when others are going in reverse," Lewis says, contrasting NZME's profit and subscriber growth with Bauer's decision to up sticks in NZ.
Lewis said Osmium was attracted to NZME's combination of newspaper, digital and radio assets.
"The NZ Herald is the New York Times of New Zealand. There will always be a market for quality journalism, whether it's in print or online," Lewis says. Management had been executing well in the company's digital transition, he adds. "OneRoof seems to be getting a lot of traction." NZ's low Covid numbers also appealed.