Activist investors are buying into old media companies

Charles Harris | Carnegie Museum of Art | Getty Images

Stop the presses — or, at least, please, run them more efficiently. That's the message more media companies may soon be hearing from activist investors looking to make a quick buck.

Monday's news that Jana Partners took a stake in Time Inc. sent the magazine company's stock more than 5 percent higher in early trading. But the stock is still down more than 7 percent so far this year.

Some say hedge funds' interest in media stocks could proliferate in months ahead. The market clearly took note of Jana's stake in Time, as other print media companies' shares rose in trading Monday.

"Undervalued and out-of-favor media stocks where the underlying assets have intrinsic value are becoming more attractive candidates for activists," said Steven Wolosky, a partner of Olshan Frome Wolosky in New York, which represents activist investors who take on big companies looking for balance sheet upgrades and other changes.

Tribune's new name, new strategy

HG Vora Capital Management in June bought 2 million shares in Tribune Publishing, or, Tronc, which is the company's new identity, making the investor the publisher's fifth-largest shareholder.

It is likely the hedge fund was looking to benefit from what could be a deal with Gannett Publishing, which repeatedly made overtures to buy out the newspaper publisher. What is less clear is whether an actual merger will ever come to fruition, or if Tronc will continue to beat back bidder interest. Tronc rejected Gannett's previous bid, and for now, it appears a deal has stalled.

Gannett, which runs USA Today, was targeted by an activist of its own, Carl Icahn, in 2014. The Virginia publisher split its print and television businesses, as Icahn suggested, shortly after the activist took his stake. However, Gannett insisted that Icahn didn't push its hand; the company said it had planned the split already.

Activist investors' watchful eye has shifted in recent months, as campaigns to push companies to conduct buybacks or execute dividends may be running out of potential targets.

One source who regularly hears from activist hedge fund investors said he thinks the media investment strategy could extend to other companies, such as television network operators, in the future. But that may mean bigger activists have to tune into multibillion-dollar network operators in order to be heard. If they do, they could once again dial up profits by betting on an aging industry.

Correction: An earlier version misspelled Steven Wolosky's last name.