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Cablevision Shares Dip More Than 12% in Market Free Fall

9/15/2008 12:15 PM Eastern

The meltdown in the financial markets spurred by the bankruptcy of investment banker Lehman Bros. and the sale of Merrill Lynch to Bank of America didn’t affect cable stocks much Monday, except for one—Cablevision Systems Corp.

Cablevision stock, which has been on the rise in the past month after its top executive said it would explore ways to boost shareholder value, fell 12.3% ($3.67 per share) Monday, closing at $26.11 per share.

Cablevision’s performance capped a dismal day on the stock market—the Dow Jones Industrial Average dropped more than 500 points, or 4.4% of its value, to 10,917.51, its biggest daily drop since the Sept. 11, 2001 terrorist attacks.

For other cable stocks, it was a day unlike many others—Time Warner Cable was down 66 cents (2.4%) to $26.77 each; Charter Communications dipped 9 cents (8.8%) to close at 93 cents each; Comcast fell 85 cents (3.9%) to $20.86 per share and Mediacom Communications was down 67 cents (8.6%) to $7.11 per share.

Satellite TV stocks fared about the same—Dish Network was down $1.39 each (4.9%) to $26.73 and DirecTV Group dipped $1.29 per share (4.7%) to $26.30 each.

Even with the dip on Monday, Cablevision stock is still up 8.5% for the year.

Miller Tabak media analyst David Joyce said Cablevision was affected the most mainly because of the deal speculation that has surrounded the company since it said on July 30 that it was looking for alternatives to boost value. That was a major factor in the stock’s 40% rise between July 30 and Sept. 12.

“Cablevision is a victim to the general market,” Joyce said. “The stock has been elevated a lot since their earnings call on deal speculation. There are a few places where there were profits so the fast money that got in got out. The deal speculation activity, that would typically hinge on the state of the credit market, could enable more strategic buyers to be involved but there would be financing. So with the credit situation continuing to worsen, that helped propel the runaway from the deal speculation based on their not being credit out there to make for a frothy sale market for any of the assets.”

Analysts have speculated for weeks that Cablevision could sell its Rainbow Media Holdings programming assets for north of $4 billion to unlock value. Joyce believes that since any buyer of those assets would be strategic buyers that have been hoarding cash on their balance sheets, the state of the credit markets is not a major concern.

While the financial news played havoc with the overall stock market, Joyce added that it shouldn’t have a long-term effect on the cable industry.

“I don’t see it being material,” he said.

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