Time Warner Cable Shares Spark Early Investor Interest
Time Warner Cable (TWC) shares began trading Fri. under the symbol TWCAV on the Over-the-Counter Bulletin Board on a when-issued basis. Shares fell about 4% to $41.25 by late- afternoon. U.S. Bankruptcy Court Judge Robert Gerber approved Adelphia’s reorganization plan this week, clearing the way for Time Warner Cable’s stock to trade (CD Jan 4 p1). Analysts were split over how much the shares ought to be worth.
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Pali Research analyst Richard Greenfield pegged the shares at $38, noting they should trade at a discount to Comcast and Cablevision shares because parent Time Warner still holds most of the stock. Prudential’s Katherine Styponias put a $44-$55 range on the stock. The entire stock float is coming from Adelphia’s bondholders, who are looking to monetize their 16% stake; that should bring the price down, Greenfield wrote: “We expect significant near term selling pressure on TWC shares.”
TWC shares could be listed on the N.Y. Stock Exchange by late Jan., a spokesman said: “The judge’s order is subject to appeal. But if no further stay is granted pending any appeal, it is expected that the plan would become effective mid- January and that Time Warner Cable securities could be listed on the New York stock exchange sometime around the end of the month.” If the stock begins trading then, it would moot a planned initial public offering and an S-1 statement the company filed with the SEC (CD Oct 19 p5).
Fri., brokers traded positions on the TWC stock on the assumption it will be listed on an exchange soon. TWC had no hand in the OTC-trading, the spokesman said. No money has changed hands, but that will change once the stock is declared effective, said Wall Street Access Research Dir. Tom Burnett: “These are very likely going to be realistic trades, and they are handled this way in the late stages just in case something else happens.”
Time Warner, which owns the other 84% of TWC, probably won’t begin selling its shares until 2008, “after tax consequences ease,” Greenfield said. After it does sell some stock, TWC will probably look to buy some other cable systems with the stock, analysts speculated. Charter’s systems in southern Cal. and Tex. would be the most likely targets for an acquisitive TWC, Miller Tabak analyst David Joyce wrote. Charter might be looking for such a deal that would bring in lots of cash and help it reduce debt, Joyce said. Buying Charter’s systems would help TWC strengthen clusters in areas it got through the Adelphia merger, he said.