Cable One Has Mixed Market Debut

Spin-Off From Graham Holdings Completed at Midnight
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Cable One, the newest cable stock on the block, had a mixed debut Wednesday, opening on the New York Stock Exchange at $450.48 per share, up about 6% ($24.98 each) from its when-issued price the previous day of $425.50 each, but losing ground in later trading.

Cable One completed it spin-off from former parent Graham Holdings at midnight on July 1, with Graham stockholders receiving one share of Cable One for ever Class A or Class B share of Graham they owned.

The stock, traded on the NYSE under the symbol “CABO,” lost some of its initial ground in later trading. It was priced at $429.22 at 10.22 a.m. Wednesday and continued to fall, closing July 1 at $399 per share, down $11.4% from its opening price and 6.2% off its $425.50 when-issued price.

Cable One debuted as the highest priced stock in the cable sector – at $450.48 it is more than  three times the price of Charter Communications and Time Warner Cable. But that is because of the small number of shares issued to the public. While the exact number is dependent on how many shareholders exchanged their Graham shares, Graham Holdings had planned to issue about 5.8 million shares of Class A stock. In comparison, Charter has 112.1 million shares outstanding and Time Warner Cable has 282.69 million outstanding shares. In addition, Cable One’s market cap is estimated at about $2 billion, compared to $19.18 billion for Charter and $49.85 billion for Time Warner Cable.

Cable One has lost about 20% of its video customer base in the wake of its decision to drop about 15 Viacom channels more than a year ago . But those losses seemed to level off in the first quarter and the company is optimistic for its future.

 “Cable One is extremely well positioned as an independent company to continue its tradition of excellent returns for its shareholders, rewarding careers for its associates and unusually high satisfaction for its customers,” CEO Tom Might said in a statement.

Graham Holdings chairman and CEO Donald Graham was equally optimistic.

“Cable ONE, which Katharine Graham called her best acquisition ever, has been centrally important to Graham Holdings for 30 years,” Donald Graham said in a statement. “And, Tom Might and much of his able management team have been part of the place even longer. We all believe Cable One will have an impressive future.”

JP Morgan analyst Philip Cusick initiated coverage of the stock with a $476 price target, adding that although it appears pricey at about 9.6 times 2016 estimated cash flow, it could “eventually be of strategic interest to larger and acquisitive cable players.”  

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