Time Warner Inc. (NYSE: TWX) and Time Warner Cable (NYSE:TWC) shares have been a bit stalled because investors are wondering what is coming. The company has been in a strategic review period since last earnings, but no one knows if the parent is going to unload more cable stock. A Reuters article last week pointed to the issue of whether shares would be coming, but the answer is still unknown. The speculation is roughly equal on both sides, but the ultimate answer is probably somewhere in the middle and the company did say this was an option.
But there is another issue to consider, mostly because Time Warner itself doesn't want to lose control of the cable unit any time soon. If it sells shares on its own behalf then it can unlock more value. But if it sells too much then the actual cable unit itself would have to use cash to make acquisition deals when it can.
This is a conundrum for shareholders in both stocks. The parent could probably raise another $3.7 billion in cash if it sold another 10% of the cable subsidiary unit, but then it has another 20% to use for acquisitions or distribution before its gets under the 50% majority stake. The company already bought back more than enough stock, and Carl Icahn is still present, but mostly out of the stock and is not making any more waves. If it does sell cable shares from here, then the parent needs to use the cash for bolstering business rather than continuing more and more buybacks.
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
Will Time Warner sell more cable stock, or not?
Posted Jun 4th 2007 4:40PM by Jon Ogg
Filed under: Time Warner (TWX), Time Warner Cable (TWC)
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