IPO is third-largest ever in U.S.
NEW YORK — Charter Communications, the cable company owned by Microsoft co-founder and DreamWorks investor Paul Allen, rose 20% in its first day of trading — a performance Wall Streeters called stellar, especially considering the massive size of the deal.
Charter sold a whopping 170 million shares for $19 each, raising a total of $3.2 billion from the initial public offering. The price was at the high end of a projected $17-$19 range, and the IPO was the third-largest ever in the U.S.
The issue was the most heavily traded on U.S. markets, which finished the day lower.
“I thought there would be a lift, but I didn’t expect so much. That’s real money,” said an analyst. The typical Internet IPO can see its stock price soar, often because the offering is limited and “you’ve got all this money chasing a few outstanding shares,” the analyst said.
Still in control
Allen retains about 95% voting control of Charter, which has 6.2 million cable subscribers, including pending acquisitions. It provides traditional cable TV services plus digital cable and high-speed Internet access.
Under Allen, Charter has grown quickly over the past year to become the fourth-biggest U.S. cabler. Allen’s unexpected dive into the cable business is credited by many with kicking off the giant merger and acquisition binge in the industry that has driven prices for cable properties sky high.
The billionaire investor has focused on reaching critical mass, several Wall Streeters said, and now needs to hone his skills as a cable honcho alongside Charter’s well-respected management.
The goal of cable nowadays is clustering, or owning contiguous systems. Charter’s footprint is all over the map, several Wall Streeters said, and needs to be rationalized through swaps and other deals. Allen “hasn’t proved himself yet,” one said.
But they’re happy to give him the benefit of the doubt. “He’s seen as somewhat on the cutting edge and has an interesting collection of assets,” according to another analyst. Along with the DreamWorks stake, Allen owns chunks of Oxygen Media, High-Speed Access Corp. and other growth companies.
Charter shares closed up $3.75 at $22.75.