As expected, Cablevision Systems Corp. stock dropped $8.94 per share (32%) to $19.20 each Tuesday, reflecting the $10-per-share cash dividend paid out to shareholders Monday.
The dividend, which was funded with $3 billion in loans, was announced earlier this month.
In a research note, Oppenheimer & Co. Inc. cable and satellite analyst Thomas Eagan said the price drop was expected during the first trading day after the dividend was issued.
Eagan maintained his “buy” rating on the stock, adding that the shares could see some potential upside from a privatization of Cablevision’s Madison Square Garden assets -- including the National Basketball Association’s New York Knicks, the National Hockey League’s New York Rangers, the arena and MSG Network.
Eagan estimated that the Dolan family received about $650 million in cash from the special dividend for its 22% economic interest in Cablevision.
“We also believe that one of the purposes of the cash is to enable CEO Jim Dolan to take MSG private, as the sports teams and MSG arena have long been Jim Dolan’s passion,” Eagan wrote.
Eagan valued the MSG assets at about $850 million, but that as a “sale” could be worth $1.25 billion.
Eagan’s privatization premise parallels that of another analyst, Citigroup’s Jason Bazinet, who has been saying for weeks that the dividend could make it easier for the Dolans to take the whole company private.
Bazinet -- who maintained his “buy” rating on the stock but reduced his price target from $34 per share to $24 in light of the dividend -- wrote in a report that the payout could reduce the Dolan family’s cost to take Cablevision private by about $570 million.