A lot of people are unhappy with Cablevision -- and we're not just talking about customers -- we're talking about investors. The company has no shortage of problems: Shareholders are revolting; competition is obscene; and debt is mounting.
It's ugly enough that Citi analyst Jason Bazinet, whose research fueled a sell off of the stock this morning, recommended investors get out of the stock now. Bazinet notes that Verizon, which is rolling out premium-TV service throughout New York City, could eat (some of) Cablevision's lunch. He also says Cablevision could get slammed by higher interest rates on $1.4 billion in debt that needs to be refinanced.
And while shareholders are pushing for a breakup or asset sale, what has Cablevision done to appease them? It spent $650 million on a 97 percent stake in newspaper publisher Newsday. To put it delicately, the newspaper business is not growing.
"Let's just say we thought there were better uses of capital," says Chris Marangi, an analyst at Gabelli & Co.
The company isn't without options, though -- they're just not the sort of options the Dolan family -- which controls Cablevision -- will like.
Mario Gabelli, one of Cablevision's largest shareholders, wants the company to "make love" to Time Warner Cable. Hard to imagine any transaction will be quite that romantic, but a breakup or sell off is looking increasingly likely -- especially since the Dolan's bid to take the company private was rejected a couple years ago, and investors such as Harbinger Capital are gearing up for war.
"I think all options are on the table -- including asset sales and spinoffs," says Marangi. "I think Wall Street expects more, and contrary to what people may say about the Dolans, to some extent they do care about the stock price and the public perception of the company."
The short list of acquirers, say analysts, ought to include Time Warner Cable and Comcast -- both of whom have use for Cablevision's cable system.
"Cablevision has always been off limits, since it's controlled by the Dolans," says Stanford Group analyst Fred Moran. "But since shareholders like Mario Gabelli are pushing for a split up of Cablevision's assets -- timed concurrently with the spin off of Time Warner Cable from Time Warner-- you could see for the first time potential discussions of merging Time Warner Cable with Cablevision -- or [Time Warner Cable] buying selected parts of Cablevision's systems."
But if anything happens, it may not be until next year, says Moran.
"Both companies have their hands full with their various asset separations that have either been announced or are currently under consideration," says Moran.
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