Stewart Board Stands Behind Maligned Martha

Indeed, much of the value of retail and media company stocks -- especially those tethered to one individual -- hinges on the desirability and sustainability of a brand name. Some analysts say branding is a matter of "economic good will," and that it will take time to assess the damage to the Martha Stewart brand and its toll on the company's intrinsic value.

"The Martha Stewart brand still has value, but not the value it once did," said John Linder, an analyst for Alsin Capital Management, which holds no positions in Martha Stewart shares.

Of course, the myth of Martha Stewart as a sweet-natured doyenne of domesticity was punctured long before today's news, so the damage to the brand may be largely priced in. "At this point, as long as she doesn't get dropped by Kmart or her other sponsors, I don't see her brand being further damaged," said Linder, who adds that a mitigating factor is that Stewart's problems were personal -- "not business. It's not like she's putting out some bad candles and people are getting sickened."

In any case, Stewart appears unlikely to end up in the poor house. Even were Stewart to step down in the face of a possible criminal indictment, she probably wouldn't walk away company empty-handed. The company's most recent proxy statement says the executive is entitled to receive an "immediate lump sum cash payment" equal to the sum of her unpaid salary, three times her annual base salary and at least an additional $5 million. She would forfeit the so-called golden parachute if she left the company because of "conviction of a felony or willful gross misconduct." The filing is silent on the issue of what happens to that payment if she leaves under the cloud of indictment.

MacKay advises investors to avoid the stock and said it is worth about $7 a share based on all the information currently available. Other observers are equally skeptical.

"I don't think much of the company on a fundamental basis," said Mark Haefele, chief financial officer and chief operating officer of Sonic Capital and a contributor to RealMoney.com. Sonic is short Martha Stewart Living.

"It faces a variety of issues including poor corporate governance, no profits, poor prospects and shareholder lawsuits. Given these issues, this stock's run-up from its lows is emblematic of the speculative run we have had."

Martha Stewart Living is up 78% since hitting a low of $5.26 last October.

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