New York, NY, Mar. 9--The board of Martha Stewart Living Omnimedia Inc. met Monday without reaching any firm conclusions as to the future of its founder, Martha Stewart, according to people familiar with the situation.
The company is grappling with its future in the wake of Stewart's conviction last week on counts of conspiracy, obstruction and making false statements.
Most of the board's meeting, which took place in the early part of the afternoon, centered on the role Stewart will play. In the short term, she is expected to resign from the board.
Executives from Martha Stewart Living have said they will delay making decisions about the company's products, which include television shows, magazines and branded merchandising, until they are able to take the temperature of customers, partners and advertisers. The board isn't meeting Tuesday, as was expected, although lawyers for Stewart and the company are expected to have a series of meetings to hash out her exact future status.
Monday, Stewart took the first step of her posttrial life when she met with a probation officer. She will likely be sentenced in June. "I want to thank my readers, my viewers and the Internet users," Stewart said in brief comments to the throng of television cameras recording her every move. "I just want to thank everyone for their support." Separately, Stewart resigned from the board of cosmetics company Revlon Inc., a position she had held since 1996. A Revlon spokeswoman declined to comment on the move.
A spokeswoman for Martha Stewart Living declined to comment.
Thrust into the spotlight is Martha Stewart Living's chairman, Jeffrey W. Ubben, a former Fidelity Investments analyst and now a managing partner of ValueAct Capital Partners, the largest shareholder behind Stewart herself. ValueAct owns 4.2 million Class A shares--or about 21% of that class--that it acquired in early 2002 at $15 a share, with an additional batch at about $14.50. That deal was struck before Stewart was contacted by investigators looking into trading iin ImClone Systems Inc. stock.
ValueAct is a fund that typically takes a large stake in a small number of portfolio companies and takes an active role in managing them. Ubben was appointed chairman after Stewart's indictment in June 2003. People who have spoken to Ubben say he has remained loyal to Stewart throughout her legal ordeal and believed until the end it was possible she would be acquitted. In fact, he was pushing to restore Stewart to her former title of chairman and chief executive if she won the case, these people say.
But he has also put his stamp on the company since becoming chairman. Gone are two board members who were close to Stewart. In their place, Ubben recruited Bradley E. Singer, a former Goldman, Sachs & Co. banker. Thomas C. Siekman, a former general counsel of the old Compaq Computer Corp., also joined the board.
Ubben didn't return calls seeking comment.
His task is unenviable. Few companies are so tightly intertwined with their founder as Martha Stewart Living is with Martha Stewart.
Martha Stewart Living's stock has been on a roller coaster since Stewart's name became associated with the government's investigation into trading in ImClone stock in the summer of 2002. From about $20 in the spring of that year, it slipped below $6 in October 2002. In anticipation of an acquittal of Stewart, the stock climbed back to more than $14 in late February, only to collapse after the verdict. As of 4 p.m., in composite trading on the New York Stock Exchange, the stock was at $9.90, down 9% for the day. The shares are significantly lower than the level at which Ubben bought into the stock. For Stewart, as prosecutors never tired of noting, every $1 drop in the company's value hurts her personal wealth to the tune of $30 million. Stewart owns more than 60% of the shares outstanding.
One option available to Ubben is to take the company private. A research note published by Morgan Stanley's Douglas Arthur over the weekend raised that possibility. He noted that at the current stock price, the public float is valued at $145 million. He estimates the company will have cash on hand of about $160 million at the end of this year.
Also on the hook is New York hedge fund Rocker Partners LP, which surprised the market in late 2002 by accumulating a roughly 7% stake in Martha Stewart Living. The fund, which is known for betting on stocks that might decline, not rise, accumulated more than 1.2 million shares at an average price of about $8 a share. According to people familiar with the matter, Rocker dumped a "very significant" chunk of its stock before the guilty verdict came down.
