Charter Communications Inc. stock was up about 12 percent in early trading last Wednesday, after the company revealed that chairman Paul Allen had purchased 845,940 shares of common stock at $29.61 each, as part of an earlier "put" agreement.
The purchase, made on Nov. 25, increased Allen's holdings in Charter's class A common stock to about 19.8 million shares. Allen controls about 93 percent of Charter's voting stock.
In a research report, UBS Warburg analyst Aryeh Bourkoff said the "put" agreement likely stems from Charter's purchase of Falcon Holding Group Inc. in November 1999. According to that agreement, Charter paid part of the purchase price in cash and part in units of Charter Communications Holding Co. LLC that could be put to Allen at $25.85 per share plus 4.5 percent interest.
Although Charter did not identify the party that Allen bought the stock from in its Securities and Exchange Commission filing, a separate filing by former Falcon chairman and current Charter vice chairman Marc Nathanson lists the sale of 845,940 shares of Charter stock for the exact same price.
Although it was not the major equity purchase that analysts and investors were hoping for, it managed to give Charter stock a lift. Charter stock rose 18 cents each, or 12.4 percent, to $1.63 in early trading Nov. 26.
Charter — reeling from its heavy debt load and federal investigations into its accounting methods — is down by more than 90 percent since the beginning of the year.
This is not the first time that Allen has had to buy Charter stock at inflated prices as a result of past agreements. In March, Allen bought 14.8 million shares of Charter stock at $28.37 per share, as part of put agreements associated with Charter's purchase of Bresnan Communications Inc. in 1998.
Bourkoff added that Allen also is obligated to buy 24 million units of another Charter holding company – CC VIII LLC – as a result of "put" agreements with the former AT&T Broadband (now Comcast Corp.) in April. That deal could cost Allen an aggregate of $718 million, Bourkoff wrote.
But while Charter stock surged after an insider purchase, Cablevision Systems Corp. stock dropped 7.5 percent, or $1.33 per share to $16.40 on Nov. 26, after it was revealed that its chairman, Charles Dolan sold 1.75 million shares of stock through a personal trust. The stock began to rebound in early trading Nov. 27, rising 33 cents each to $16.73 per share.
According to a Nov. 25 Form 144 filing with the SEC, the Charles F. Dolan 1994 Charitable Remainder Trust registered to sell 1.75 million shares of Cablevision class A common stock. Although a Form 144 only indicates an intention to sell and not an actual sale, the filing listed Nov. 19 as the approximate selling date. According to the filing, the shares were valued at $27.7 million, or about $15.83 per share.