Time Warner Split 'Legal'

3/12/2009 6:07 PM Eastern

Time Warner Cable, which has been trading 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 cable company 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 $10.27 per share cash dividend promised to Time Warner Inc. Time Warner Cable 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 Monday, Collins Stewart media analyst Tom Eagan wrote that this week would be a confusing one for TWC investors.

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

The confusion should continue tomorrow – Friday the 13th – as that is the date that Time Warner shares will trade inclusive of the one-for-three stock reverse stock split the companies proposed months ago.

Time Warner first proposed the split last May, which would create a pure content play (Time Warner Inc.) and a pure cable play (Time Warner Cable). The deal received regulatory approvals last month and earlier in March Time Warner set the specific dates for the spin.

According to Time Warner Cable, the cash dividend was paid on March 12 to shareholders of record as of March 11. Time Warner Inc. will officially transfer its 84% interest in the cable company to a transfer agent as of 8 p.m. today.

Those shares will be distributed to Time Warner Inc. shareholders on March 27.       

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