MSG Down In Market Debut2/10/2010 5:03 PM Eastern
Cablevision Systems completed the spin-off of its Madison Square Garden unit on Feb, 9, and the newly separate entity ended trading on the NASDAQ National Market System the next day with a slight dip.
Cablevision announced its intention to spin the unit last year. According to the transaction, Cablevision shareholders received one share of MSG stock for every four shares of Cablevision they own. The new unit, which trades under the symbol "MSG," includes the Madison Square Garden arena, its New York professional sports teams, theater venues including Radio City Music Hall, the Beacon Theater and the Chicago Theater, and cable channels MSG Network, MSG Plus and Fuse.
Shares of MSG opened at $18.22 per share, but fell as low as $17.34 each before settling down to close at $17.50, down 4% or 72 cents per share per share. Cablevision stock fell about 15.4% ($4.01 per share to $22.10 each) but that was mainly due to the spin. Most analysts valued MSG at around $5 per Cablevision share.
Analyst have praised the spin as it created a new deal currency for MSG and removed a potential drag on Cablevision's business, mainly because of a potentially costly renovation to Madison Square Garden. With that expense removed, and it's already substantial free cash flow characteristics, Sanford Bernstein cable and satellite analyst Craig Moffett wrote in a research note said the upside to Cablevision shares was substantial.
"This enables MSG to freely pursue its business plan while providing shareholders with the benefit of being able to more clearly evaluate the company's assets and future potential," MSG executive chairman and Cablevision CEO James Dolan said in a statement. "This is an important moment for MSG and we are confident about the company's prospects as a standalone company."
Also in a statement, Cablevision vice chairman and MSG president and CEO Hank Ratner said the spin would give MSG greater financial, operational and strategic flexibility. "We look forward to pursuing our strategy of capitalizing on the combination of our leading venues, popular sports and entertainment content, and regional and national programming networks to grow the overall business," Ratner said in the statement.