Cable Operators

Bumpy Ride For Time Warner Cable

3/14/2009 2:00 AM Eastern

Time Warner Cable, which has traded the past week as if it had already split from Time Warner Inc., legally separated from the parent as of 8 p.m. Thursday, capping what has been a slightly confusing week for the shares.

The MSO has been trading on a when-issued basis since Monday, March 9, when it closed at $6.79 per share. That appeared to be a big drop from the previous trading day — it closed at $18.06 per share on March 6 — but was only because the stock began trading March 9 as if it had already issued a $10.24 per share cash dividend promised to Time Warner Inc. TWC stock closed at $8.33 on March 12, up 61 cents.

Time Warner Inc. stock has been fairly consistent in the past few days — it closed at $7.47 each on March 6 and $8.32 on March 12.

In a research note last week, Collins Stewart media analyst Tom Eagan wrote that the week would be a perplexing one for TWC investors.

“We expect plenty of confusion and volatility regarding the trading of this stock,” Eagan wrote.

The confusion continued on Friday the 13th, the date that Time Warner shares first traded inclusive of the one-for-three stock reverse stock split the companies proposed months ago. In early trading last Friday, TWC stock was priced at $25.90 per share — up 91 cents (3.8%) each — and Time Warner Inc. shares increased 8 cents each (1%) to $8.40 per share.

However, Eagan wrote that the true volatility may occur after March 27, the date when Time Warner Inc. shareholders will actually receive their TWC shares. Eagan believes there is an incentive for Time Warner Inc. shareholders to sell their TWC stock, which would put pressure on the shares in the short term.

September