On July 19, the board of directors of Knight Ridder, the country's second-largest newspaper chain, held a most unusual meeting. It was at the Ritz-Carlton Hotel near the top of San Francisco's Nob Hill, and it was unusual because, as the 10 board members convened, representatives of Knight Ridder's three biggest shareholders were camped outside the door, waiting to air their gripes about the company's stock performance.
This meeting would mark the start of an insurrection that ultimately would force the board to put Knight Ridder up for sale, threatening the future quality of its journalism and causing tremors throughout the newspaper industry. One restive shareholder in particular, Bruce S. Sherman of Naples, Florida, was the instigator and ringleader.
Sherman (or rather, the institutions and rich individuals whose wealth he manages) owned about 19 percent of Knight Ridder – a huge stake, far larger than anyone else's. He had been accumulating it for five years, starting with less than a million shares and adding more as his investment group attracted new clients.
When Sherman first began buying the stock in 2000, it was selling in the low to mid $50s. As it rose into the $60s and then the $70s, he kept buying. On April 23, 2004, it peaked at just under $80 a share. Then it faltered and fell.
On the day of the board of directors meeting, Knight Ridder shares were selling at $62. Sherman owned 13 million of those shares, for which he had paid, in the aggregate, about $65 a share. He was under water on the stock.