Cable stocks got hammered Monday, the victim of an overall market sell-off
spurred by two unrelated reports of questionable corporate-accounting practices
in the wake of the Enron Corp. scandal.
The Dow Jones Industrial Average dropped 220.17 points Monday, or 2.2
percent, closing at 9,687.09, after Tyco International Ltd. reported that it had
made 700 acquisitions over the past three years, valued at $8 billion, that it
had not publicly announced.
In addition, Global Crossing Ltd., which filed for Chapter 11 bankruptcy last
week, said it faces an investigation into its accounting practices by the
Securities and Exchange Commission.
Although cable companies were not connected with any of that bad news,
investors began to unload their holdings in anything that they believed had
complicated or highly leveraged capital structures.
'Anything that's leveraged or has a convoluted capital structure is basically
getting hit,' Janco Partners cable analyst Matt Harrington said. 'If you have
any issues in your capital structure whatsoever, the market is not unforgiving,
but punitive. When you look at the whole telecommunications group, in which
cable is included, broadly, it's a disaster.'
Insight Communications Co. Inc. and Adelphia Communications Corp. were the
big losers in the cable sector Monday, losing 7.8 percent and 7.2 percent of
their value, respectively.
Insight -- which has most of its cable holdings in complicated partnerships
with AT&T Corp. -- closed at $20.73 per share, down $1.76.
Adelphia, one of the most highly leveraged MSOs in the sector, dropped $1.86
Other MSOs that lost ground included AOL Time Warner Inc. (down $1.75 to
$24.24); AT&T Corp. (down $1.03 to $16.30); Charter Communications Inc.
(down 56 cents to $11.46); and Comcast Corp. (down $1.24 to $33.59).
Rounding out the cable sector were Cablevision Systems Corp. (down $1.31 to
$41.15); Mediacom Communications Corp. (down 44 cents to $17.26); and Cox
Communications Inc. (down $1.06 to $36.02).