For a company that pins its livelihood on delivering its clients' stories and products, Snyder Communications Inc. has not been able to sell its own message to the stock market despite a steady record of revenue growth and a strategy that securities analysts endorse.
Since April 1998, the value of Daniel M. Snyder's stock in his own company has withered by about $350 million--more than he spent to buy his stake as principal owner of the Washington Redskins.
The steep slide in Snyder Communications's stock price from a high of $53.62 1/2 a share 15 months ago to $17 yesterday has no financial impact on the Redskins, Snyder has stated.
But Snyder certainly knows how the Redskins felt midway through last year's punishing, embarrassing season, which they started 0-7.
"There's a disconnect between what analysts are saying and how investors are responding," said Amy Brodsky, a securities analyst with Prudential Vector Healthcare Group in Chicago.
Through a spokesman, Snyder declined interview requests this week because he is awaiting regulatory approval of plans to split his Bethesda-based company in two next month by spinning off its health-care marketing business.
Snyder and his aides did talk to Wall Street analysts via a telephone conference call last Thursday, however, revealing that the costs of the health-care spinoff would total $23 million over three years, somewhat more than analysts expected.
The stock plummeted the next day to just over $19 a share. It closed yesterday at $17, up 12 1/2 cents, on the New York Stock Exchange.
Just who was dumping Snyder shares isn't known, but a number of analysts believe that some major funds hit the "sell" button.
"When there's a unanimous opinion that the company is making the right moves and yet there's a strong sell move, it usually means a couple of very large investors don't agree with what the company is doing," Brodsky said.
Snyder's stock was probably pushed down this week by a second force--short-sellers who have been betting for months that the company's share price would fall, analysts said.
Short-sellers invest in securities contracts in which they sell shares while agreeing to buy them back at a later date--when they hope the price has fallen, generating a trading profit.
The size of the short-sale contracts in Snyder stock this year has consistently exceeded 10 million shares--or 20 percent of the publicly traded stock. This unusually large cloud of "short interest," as it's called, is in large part an unwanted consequence of the strategy Snyder used to build his company after it went public in 1996.
In rapid sequence, Snyder purchased two dozen companies specializing in advertising, direct marketing, pharmaceutical sales, database management and market research, swelling annual revenues from $43 million in 1995 to nearly $1 billion today.
Snyder paid for these companies primarily by issuing Snyder stock to their owners, and some of them have sought to protect themselves against a drop in Snyder's stock price through a form of short-sale contracts, the company confirms.
This large short position may have encouraged speculators to increase short sales against the company this week, analysts said. "That's put pressure on the stock in the past. It feeds on itself," Brodsky said.
But the main issue for Snyder is that investors who liked the stock when the company was expanding haven't been as thrilled with its operations, even though Snyder Communications has steadily increased revenues and quarterly earnings, analysts said.
Snyder signaled analysts in June that the company was no longer pursuing an acquisitions campaign and he emphasized that point in last Thursday's conference call. Some major investors apparently didn't welcome the news.
Fairly or not, some big investors may also have concluded that Snyder's purchase of the Redskins would steal some of his attention away from his business, said George F. Shipp, an analyst with Scott & Stringfellow Inc. Snyder strongly disputes the notion.
Synder did not draw on his 9.4 million Snyder shares when he and his partners bought the team in May; thus, the fortunes of the two enterprises aren't linked, he says.
This summer, Snyder and top aides concluded that the amalgam of marketing and advertising companies they had assembled was confusing Wall Street investors, who weren't sure whether it should be valued as an advertising company or a direct marketing company.
That prompted the plans to split up the company, with the health-care marketing divisions being spun off as a new firm called Ventiv. If regulators approve the plan, Snyder shareholders will get one share of Ventiv for each two shares of Snyder they own. Ventiv will have a separate operating team, but Daniel Snyder will be the chairman and largest individual stockholder.
The major surprise for analysts last Thursday was the $23 million cost Snyder will lay out to launch Ventiv--including a hefty charge for publicizing the company's name.
Analysts said that Snyder's message last week was that his company would do what it had to do to meet its growth goals, even if Wall Street wasn't delighted.
The market's reaction was not an endorsement of the strategy.
Market analysts such as Brodsky, Shipp and Fran Blechman Bernstein of Merrill Lynch & Co. say they remain convinced that Snyder--together or divided in the future--is worth perhaps twice what it's fetching on the stock market.
Snyder can only hope that the recent sell-off has created a new group of investors who may be more receptive to that point of view, the analysts say.