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Cable One Spinoff Off to a Rocky Start

7/06/2015 8:00 AM Eastern
TakeAway

Cable One’s maiden voyage as a public company was a rough one, as the midsized cable operator lost more than 10% of its value over its first trading day.

Cable One had a tumultuous first day as a publicly traded company, entering the New York Stock Exchange on July 1 at a robust $450 per share but losing more than 10% of its value as the trading day ended.

 

Former parent Graham Holdings officially spun off Cable One at midnight on July 1, with each Graham Holdings shareholder receiving one share of the MSO for every Graham share they held. The stock began “regular way” trading on the New York Stock Exchange under the symbol “CABO” that morning. The shares had been trading on the when-issued market for about a month, ranging in price from $376.91 to $430 per share.

 

Cable One stock opened at $450.48, but steadily lost ground during the day, closing at $399, down 11.4% from its opening price. The stock gained some ground on July 2, priced at $401 per share in early trading.

 

With just 5.8 million shares outstanding — a fraction of the public float of other publicly traded operators, such as Time Warner Cable (282.7 million), Charter Communications (112.1 million) and Comcast (2.1 billion) — Cable One’s market capitalization is about $2 billion.

 

Cable One, which has about 476,000 video customers in 19 states, has lost about 20% of its video-customer base in the past 14 months after it decided to drop about 15 Viacom networks in April 2014. While those losses were heaviest in the early months after dropping Viacom, they have seemed to level off — Cable One lost about 30,000 video customers in the first quarter — and the Phoenix-based operator has concentrated on selling packages of high-speed data and phone service.

 

“Cable One is extremely well-positioned as an independent company to continue its tradition of excellent returns for its shareholders, rewarding careers for its associates and unusually high satisfaction for its customers,” CEO Tom Might said in a statement.

 

JP Morgan analyst Philip Cusick began coverage with a $476 price target, saying though it appears pricey, at about 9.6 times 2016 estimated cash flow, it could “eventually be of strategic interest to larger and acquisitive cable players.”

 

Liberty Global, meanwhile, introduced its Latin American tracking stock — Liberty Latin America and Caribbean Group (LiLAC) — on July 2. The tracker, which includes Liberty’s interests in Chilean-based VTR GlobalCom SpA, VTR Wireless SpA and Liberty Cablevision of Puerto Rico LLC, opened on NASDAQ at $56.10 per share but dipped as low as $44.01 in early trading July 2.

 

In a tax-free exchange, Liberty Global shareholders received 1 share of LiLAC for every 20 LGI shares they own. The tracker was issued mainly to unlock the value of the Latin America assets, and could be used as a vehicle to consolidate one of the fastest growing pay TV regions in the world.

 

“The launch of our LiLAC tracking stock is an exciting event, which we believe will enhance long-term equity value for shareholders,” Liberty Global CEO Mike Fries said in a statement. He said its advanced platforms make it “uniquely positioned to exploit the highly fragmented landscape characterized by low broadband and pay TV penetrations.”

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