Home » Black Swans » CBS Spins Out BillBoards. Danger Sign of Really Old Media $CBS

CBS Spins Out BillBoards. Danger Sign of Really Old Media $CBS

CBS (NYSE:CBS) announced a financial magic trick. They will spin-off part of their global bill board business into a REIT type structure. Payout 90% or more or profits and do not pay taxes. Financial engineering at its best.

Investors will end up with REIT units so what to do? Initially a lot of investors will want to sell and realize cash.

CBS is not selling the crown jewels or the cash cow which pays the bills. They are selling something that they have maximized. CBS is in the business of selling advertising. This medium does not show growth prospects so its a discard for CBS.

Real Estate and Energy lend themselves to REIT style structures. Shopping centers and office buildings have twenty year leases with escalation. Bill boards are rented for short period and are subject to churn.

Lastly look at the technology. Right now you put up an ad manually and replace it next month. New digital offerings will allow you to run multiple ads and control time of day and frequency. Who will pay for the capital cost of this upgrade cycle.

Thanks CBS. I concur with your assessment that billboards no longer fit in with your other assets. But I would be a seller of the new units. Fundamentals are not there.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or maybe follow his evil twin who is writing a Wall Street Murder Thriller at twitter@georgegutowski