New York -- The first MSO initial public offering in more
than a decade was expected to do well, and it didn't disappoint.
Insight Communications Co., a 1 million-subscriber MSO,
increased its offering to 23 million shares and hiked the initial price to $24.50 late
last Tuesday due to heavy demand for the stock. Even so, it opened at $25.25 per share and
quickly rose to $32 before closing at $29.94. By last Thursday's close, the price was
Insight expected to raise around $563.5 million through the
The IPO was the first by an MSO since Cox Enterprises Inc.
spun off its cable assets in 1995. Before then, the last true cable-operator IPO was by
Cablevision Systems Corp., which went public in 1986.
Insight president Michael Willner was "thrilled"
with the success of the offering, but he added that the company's work has just begun.
"We have a lot of work to do in completing our
rebuild, closing the Kentucky transactions and rolling out new bundled telecom
services," Willner said. "All of that is going to be actively pursued.
Basically, we should finish our rebuild by this time next year."
Willner added that the additional shares tacked onto the
offering and the additional money that was raised could also be used for even more
"Obviously, we have the gunpowder for more
acquisitions as they become available," he said. "I think there will be a
continued rationalization of properties."
Insight's IPO was also expected to be a bellwether for
future IPOs in the cable industry: Charter Communications and Mediacom LLC are expected to
test the public markets this year. And at least by early indications, the market appears
hungry for cable stocks.
SG Cowen Securities Corp. analyst Gary Farber said the
Insight IPO shows that there is continued strength in the cable sector.
"This indicates that despite the fact that there are
clearly benefits to being larger, there is still plenty of room for companies under 2
million subscribers," Farber said.
Farber was also unconcerned about the high percentage of
class-A ownership the company sold in the offering, mainly because most of its voting
control is in class-B shares, which were not part of the IPO.
"They've got to have some float to get people
interested," he added.
Cable stocks have been on the rise ever since Microsoft
Corp. invested $1 billion in Philadelphia-based MSO Comcast Corp. in 1998. The recent deal
frenzy and the potential of advanced services -- including high-speed Internet services
and telephony -- have driven cable stocks to their highest levels ever.
Charter's IPO, which is expected before the end of the
year, could fetch as much as $3 billion, according to some analysts. That hefty price is
based on the company's size (6.2 million subscribers after various deals are closed) and
its largest investor: Microsoft cofounder and billionaire Paul Allen.
Insight plans to use the cash to finance its acquisition of
424,000 customers in Kentucky from InterMedia Capital Partners VI, to introduce new
products and services and to make an equity investment in a telephone joint venture with
AT&T Corp. The MSO agreed to purchase a 50 percent interest in InterMedia Capital
Partners for $750 million in cash and assumed debt in April.
The proceeds will also be used for other strategic
acquisitions and general corporate purposes.
The Insight offering represents 41 percent of the company's
56 million total outstanding class-A shares, which have one vote each.
However, the majority of the company's class-B shares,
which have 10 votes each, will remain in the hands of officers and directors of the
company after the offering. Those class-B shares represent about 69.1 percent of Insight's
total voting power.
The 23 million shares also did not include an additional
3.45 million class-A shares allocated for underwriters' overallotments. Donaldson, Lufkin
& Jenrette Inc. was the lead underwriter for the offering.
Insight had originally planned to offer 20.5 million shares
at a price range of between $21 and $23 each, according to earlier Securities and Exchange