Let the speculation begin.
Cablevision Systems stock soared more than 11% ($2.39 per share) to $23.64 each in early trading Thursday after stronger-than-expected second-quarter results and CEO James Dolan’s promise to investigate ways to “close the gap” between the market value of the cable giant and its actual value.
Cablevision reported yet another strong quarter Thursday -- it added 7,000 basic customers, as other operators continue to lose basic subscribers -- and outpaced analyst expectations for both high-speed data and telephony customer growth. But that performance -- the cable company also reported 9% revenue and 12.9% cash flow growth in the period -- may have been overshadowed by Dolan’s promise to boost shareholder value.
Dolan closed the formal portion of its quarterly conference call with analysts by thanking bankers and investors for supporting the company in an extremely challenging capital environment. He also noted the company’s recent completion of a successful debt offering by it CSC Holdings unit and the successful closing of its acquisition of 97% of Newsday Media Group.
Dolan also lamented the company’s stock performance – Cablevision stock, like its peers, was down about 12% ($2.81) this year – and vowed to explore ways to improve shareholder value.
“While we are disappointed with equity valuations placed on our industry and especially Cablevision’s stock price, we are highly confident in the strength of our underlying business,” Dolan said. “This confidence is clearly supported by our consistently strong operating results, which the capital markets are not currently recognizing. We have a strong desire to close the value gap between our operating performance and the market value of our stock. We recognize that current capital market conditions may contribute significantly to this value gap and we are considering and actively exploring alternatives that may close this gap and want to assure our investors that we will be open to listening to their thoughts. In this regard the company and I personally plan to spend more time communicating our compelling story to our investors and listening to their thoughts on our performance and prospects.”
Dolan did not elaborate.
There are several avenues the company could take to boost valuations, including spinning off its Rainbow Media Holdings unit, buying back shares, issuing a dividend, or possibly taking the company private. The Dolan family tried to do the latter last year in a deal valued at about $10.6 billion. However, shareholders voted down the proposal in a special meeting last October.
Dolan said on the call that no particular option stands out above others at the moment.
“There are some obvious potential moves the company could make,” Dolan said. “But we need to study them before we say much more about them. We want to tell our story and we want to listen to shareholders about what they think too.”
Dolan said that one way the company could tell its story is to participate in more industry conferences and is developing plans for more outreach. He added that there is no disconnect between the interests of the Dolan family, which owns the majority of voting shares of the company, and other shareholders.
“I want to assure you and everyone else that the family’s interests and the rest of shareholders’ interests are completely aligned on this,” Dolan said. “We are interested in closing the gap between what we perceive as a significantly higher value for the company than what the marketplace is currently saying it is as well as putting ourselves in a position where we can access the capital markets at a decent rate.”