Shares of Time Warner Inc.'s cable systems division began trading this week in advance of a formal listing, giving the unit an implied value of $43 billion and reflecting investors' appetite for cable companies.
Time Warner Cable, based in Stamford, Conn., rose 25 cents to $41 on Thursday on a "when issued" basis in the over-the-counter market, pending a court decision that would lead to regular trading. The price, higher than analysts had estimated, prompted Sanford C. Bernstein & Co. and Merrill Lynch & Co. to raise their estimates of the business' value.
The price "is a premium to what was expected," said Joe Bonner, an analyst at Argus Research in New York. "Time Warner Cable is benefiting from the perception across the industry that cable is doing well."
Time Warner, the world's largest media company, is waiting for a judge to clear a bankruptcy exit plan for Adelphia Communications Corp. after buying the business in July and combining it with Time Warner Cable. The plan was challenged this week by some Adelphia creditors, which may further delay the unit's listing.
Demand for cable stocks propelled shares in Comcast Corp., the industry leader, up 57% in a year.
Comcast, based in Philadelphia, Cablevision Systems Corp. of Bethpage, N.Y., and Time Warner are luring customers from phone and satellite rivals with packages of TV, voice and Internet services.
Shares of New York-based Time Warner, also owner of CNN and the Warner Bros. movie studio, gained 33 cents to $22.62 on Thursday.
Time Warner Cable shares began over-the-counter trading Monday at $41 under the symbol TWCAV. They will eventually trade as TWC on the New York Stock Exchange.
Adelphia's plan to emerge from bankruptcy protection was signed Jan. 5 by U.S. Bankruptcy Judge Robert Gerber and was set to take effect 10 business days later, which would have enabled Time Warner Cable shares to trade as soon as Jan. 22.
A hearing on the challenge by bondholders including Banc of America Securities is scheduled for next week before U.S. District Judge Shira Scheindlin in Manhattan.
Creditor disputes have delayed resolution of Adelphia's bankruptcy after Time Warner and Comcast agreed to buy the assets in April 2005. Creditors have been bickering over how to split the proceeds of the $16.7-billion purchase, which includes cash and Time Warner Cable stock.
"The creditors have been arguing for years over the plan; you wouldn't expect them to stop now," said Baker, who rates Time Warner and Comcast shares "buy." "It's frustrating."