Cablevision Stock Takes A Beating

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Cablevision Systems stock plunged as much as 13% ($2.31 per share) in afternoon trading Thursday after the MSO said that it no longer is seeking strategic alternatives to boost shareholder value.

The decision comes in light of the sluggish economic climate and after another strong quarter of fundamental growth for the cable operations. But in stating that it is not seeking strategic alternatives, the Bethpage, N.Y.-based MSO appears to have quashed any short-term investor hope that a transforming deal was imminent.

The stock fell as low as $14.62 per share (down 13% or $2.31 per share) in intraday trading Thursday, but rallied later in the day to $15.57 each, down only 8%, or $1.36 per share.

CEO James Dolan said during Cablevision’s July 30 second quarter conference call that the company would seek strategic alternatives to close the gap between public and private valuations of the company. Investors immediately took that to mean an asset sale—particularly Rainbow Media Holdings or one of its networks—and drove the stock up accordingly. At one point, Cablevision stock was trading in the $32 per share range in August. It had been trading around $21 per share previously. The upswing reversed course in September, in the wake of the overall market meltdown.

In the meantime, the company’s board of director returned some cash to shareholders in the form of a 10-cent per share quarterly cash dividend approved in August.

On Thursday’s conference call with analysts, Dolan left the door slightly ajar concerning potential asset sales, but said that in light of the current economic conditions, Cablevision is “not actively pursuing any further strategic alternatives at this time and will be focusing on maintaining strong operating performance.”

Dolan added that the company would remain open to any compelling opportunities, including asset sales or stock repurchases, and “will also consider ways to preserve our liquidity without impeding the growth of our core businesses.”

For the quarter, Cablevision continued to report strong results. Overall revenue rose 15.4% to $1.75 billion and adjusted operating cash flow was up 16.3% to $575 million. Basic subscribers declined by 19,000 to 3.11 million, while digital subscribers rose by 25,000 (Cablevision increased digital penetration to 90%, tops in the industry). High-speed data customers increased by 32,000 to 2.4 million and telephony customers rose by 58,000 in the quarter to 1.8 million.

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