Network stocks climb

Network shares soared Monday in response to a court ruling that will allow the webs to own a greater stake in their programming.

Industry pundits say last week’s lifting of an antitrust consent decree against ABC, NBC and CBS came as little surprise. But confidence that this ensures the webs a bigger share of primetime profits and entry into the rich syndication market prompted at least one analyst to recommend shares in the webs.

“What this means is that CapCities and CBS are more likely to look like programmers in two years than they do today, which is likely to help their multiple in the stock market,” said Prudential Securities analyst Melissa Cook, who raised both Capital Cities/ABC and CBS to “buy” from “hold.””It’s a clear victory for the networks.”

Both CBS and CapCities/ABC stock opened higher Monday and never looked back. At the closing bell, CBS shares stood at about $ 303.13, a gain of $ 8.25 on the day. General Electric, which owns NBC but is less affected by the web’s results, added only 13 cents to $ 94.25. And CapCities/ABC shares settled up $ 11.63 at $ 630.75 — almost $ 1 above the top price the web has recently said it would pay for shares in its buyback program.

2 million shares

That could be a problem. On Nov. 1, CapCities said it would repurchase 2 million shares via Dutch auction, possibly including one-third of majority owner Warren Buffett’s holdings. In the proposed auction, shareholders will name a price between $ 590 and $ 630 a share at which they are willing to sell. The web will pick the lowest price in that range that lets it buy 2 million shares and pays that sum for shares tendered at or below it — anywhere from $ 1.18 billion to $ 1.26 billion.

At the time, several analysts told their clients to hold on to CapCities and hold out for the better price they believed was forthcoming. Buffett’s offer, an all-or-none deal for 1 million shares, was widely viewed as a “pump primer” to encourage other shareowners to tender rather than a serious desire to sell. But Monday’s price spike begged the question: What happens next?

“The stock is more valuable now than at the time the buyback was launched,” said one analyst who declined to be identified. “They may find it (the repo) may go undersubscribed.”

CapCities/ABC declined comment on the speculation.

Wall Street, of course, is known for its short attention span. Today’s darling is tomorrow’s deadbeat, and vice versa.

But while some web watchers said the market may have overreacted Monday in its elation, they also emphasized that the ruling will definitely allow the networks to maximize programming profits in the long run — and consequently bolster their stock price.

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