Charter Communications Inc. stock hit its lowest point in more than two years -- 91 cents per share -- Friday after the St. Louis-based MSO said in a securities filing that it may have to sue its chairman and largest shareholder, Paul Allen.
Charter shares closed Thursday at 95 cents each (down four cents), their lowest price since March 31, 2003, when they closed at 83 cents per share.
The dispute centers around partnership interests Allen received as part of Charter’s acquisition of Bresnan Communications in 2000. In 2002, Allen struck a deal with Comcast Corp. to buy Comcast's interests in the Bresnan partnership, called CC VIII, for about $650 million. Comcast had inherited the partnership interests as part of its acquisition of AT&T Broadband that year.
In April 2003, Charter said it had issues with ambiguous wording in the partnership agreement regarding the ultimate ownership of the Comcast rights.
Charter appointed a special committee to look into the matter in 2003, which determined that Allen should be required to contribute the interest in the partnership to Charter in exchange for 24.3 million membership units in subsidiary Charter Holdco.
Those membership units would be exchangeable into Charter class-B common stock. Allen has informed the committee that he disagrees with their findings.
In its 10-Q annual report, filed with the Securities and Exchange Commission May 3, Charter said it had agreed to nonbinding mediation to settle the matter, but it had no success. The parties have agreed to Delaware court mediation, but Charter said in the filing that if that fails, “the special committee intends to seek resolution of this dispute through judicial proceedings” in the Delaware Court of Chancery.
Charter said more than one year ago that suing Allen was a possibility -- it set a Feb. 6, 2004, deadline for a suit, but extended that indefinitely. A Business Week story on the 10-Q filing May 12 apparently refueled the speculation.
Charter stock has been declining steadily since the beginning of the year, when it was priced at $2.23 per share. With its stock price below $1, the company faces the threat of being delisted by the NASDAQ exchange if it continues to trade below that benchmark for 30 consecutive business days.