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The 5 Dumbest Things on Wall Street This Week: May 3

5. CME Czechs Out

Central European Media Enterprises (CETV - Get Report) apparently has a new motto: If at first you don't succeed in selling advertising, try, try to raise prices again.

Yeah, we don't get it either. Then again, we don't speak Czech very well.

The loss-making broadcaster, most often referred to as CME, kicked-off its debt-reduction plan by selling around $174 million worth of stock Monday. CME's partner Time Warner (TWX) was the biggest buyer, sucking up 49.9% of the class A stock to maintain its stake at that level. Time Warner's purchase comes on top of an additional $200 million of CME class B preferred shares it will buy in a private placement. CME said it would use $300 million of the net proceeds from the sale to retire a slice of pricey 11.63% senior notes due in 2016.

Although the fundraising maneuver was widely expected, shares of the company still sank over 10% to $3.90 on the extra shares being puked onto the market. Also not helping the stock was CME's dismal first quarter results. CME reported a $109 million Q1 loss Monday, compared with $13.8 million a year earlier. Net revenues sank a sickly 18.2% to $137 million, mostly due to Czech advertisers protesting higher rates.

"Our pricing actions in the Czech Republic and across our region will continue as we are determined to reverse the trend of declining TV advertising spending," said CME CEO Adrian Sarbu.

Yo, Adrian, what are you punch-drunk? If the customers in your largest market weren't buying from you before, do you really think jacking up your rates will help your cause? Do the words "price elasticity of demand" translate into Czech, or did they get lost with Slovakia?


At least Time Warner is lowering its cost basis as it vacuums up another round of CME's sloppy stock. A year ago the media giant bought 9.5 million shares of CME for $7.51 apiece in the company's last deleveraging exercise. Time Warner is down nearly 70% on its original 31% stake purchased in March 2009.

Yeah, we don't get why Time Warner would throw good money after bad either.

Then again, we don't want to speak too soon.

Jeff Bewkes' investment in CME has been one of his rare missteps since taking the CEO job at the media giant in 2008, so maybe we better Czech back later.

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