Sinclair stock rebounds after change of plans

News of broadcasters' retreat on anti-Kerry film leads to nearly 13% rise

October 21, 2004|By Andrea K. Walker | Andrea K. Walker,SUN STAFF

Shares of Sinclair Broadcast Group Inc. rose nearly 13 percent yesterday, a day after the Hunt Valley broadcaster announced plans to retreat from airing a documentary critical of Democratic presidential candidate John Kerry.

The stock regained much of the 16.5 percent it had lost during the past two weeks after the Los Angeles Times reported Oct. 9 that the company had instructed its stations to pre-empt regular programming to air a news program based on Stolen Honor: Wounds That Never Heal. The documentary includes allegations by former prisoners of war that Kerry's anti-war testimony before Congress in 1971 caused further torture to soldiers held captive in Vietnam.

The stock closed up 79 cents to $7.05 yesterday after falling to a three-year low Tuesday. Nevertheless, fallout from the controversy continued yesterday.

Burger King Corp. announced yesterday that it won't advertise for a day in nine Sinclair markets because of concerns that the show is partisan. The Miami-based fast-food chain said it does not endorse political candidates.

Meanwhile, Baltimore investment brokerage Legg Mason Wood Walker Inc. revised downward its estimates for Sinclair because of possible backlash from advertisers during the fourth quarter. A Legg report lowered projections for net broadcast revenue to $679 million from $684 million and for EBITDA - earnings before interest, taxes, depreciation and amortization - to $229 million from $233 million.

Executives of Sinclair did not return calls for comment yesterday.

Sinclair did respond to mounting criticism Tuesday by announcing that it will not air the entire Stolen Honor piece. Instead, its program will be a broader newscast about the effect of documentaries on elections. Sinclair also said it would cut by a third the number of stations that will show it, airing it on 40 instead of the original 60.

Sinclair owns or controls 62 stations in 39 markets, reaching about 25 percent of the nation's population.

"The adverse publicity unquestionably hurt Sinclair," said Andrew Jay Schwartzman, president and chief executive officer of the Media Access Project. "To the extent that the market perceived Sinclair as backing down and that minimized Sinclair's regulatory exposure, I suppose it could explain the bounce back."

Sinclair's retreat came after threats of lawsuits from shareholders who were concerned that the controversy would hurt the company in Washington, where Democratic leaders vowed to object to license renewals for Sinclair stations.

Critics have contended that Sinclair, whose executives have donated heavily to Republican causes, was using its stations to influence voters by showing the Kerry documentary so close to election. It is to air tomorrow at 8 p.m. on WBFF, Sinclair's Baltimore flagship station.

Some analysts, however, said such controversies rarely have lasting impact on a company's finances.

"In the long run, a company's political perspective isn't what investors are investing in," said Dom Caristi, an associate professor of telecommunications at Ball State University in Indiana. "They're investing in the company's ability to gain a return on their investment."

Although Tuesday's announced retreat helped settle Wall Street, several dozen people gathered yesterday evening on the sidewalks in front of Sinclair headquarters to protest what they described as misuse of public airwaves to sway the election.

With a cold drizzle falling and eight Baltimore County policemen standing watch, a crowd lined both sides of Beaver Dam Road with signs that criticized Sinclair as a "weapon of media distortion" and "GOP TV." A Sparks man played the guitar and sang anti-Bush songs. Others called on passing motorists to boycott businesses that advertise on Sinclair networks and demanded that the company's broadcasting license be revoked.

"I feel so strongly about someone taking over and showing just one side of a situation. I'm very disappointed that the FCC didn't do something about this," said Lee Williams, 71, a retired elementary school teacher who lives in Roland Park.

Sun staff writer Jennifer McMenamin contributed to this article.

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