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NEW YORK – Shares of Cablevision Systems took a big hit in early Friday trading after the Long Island-based cable operator announced the surprise resignation of COO Tom Rutledge late Thursday.
As of 10am ET, the stock was down 13.9 percent at $11.99 after earlier hitting a 52-week low of $11.86. Over the past year, the stock has traded as high as $27.60.
Miller Tabak analyst David Joyce downgraded Cablevision’s stock from “buy” to “neutral” and cut his short-term price target to $15 from $22.
Barclays Capital analyst James Ratcliffe called Rutledge’s departure after 10 years a “clear negative” and “a clear loss” given his “strong operating track record.” Added Ratcliffe: “Cablevision has no obvious replacement for Rutledge, nor are there clear external candidates of a similar calibre.”
Overall, the personnel loss is “likely to only increase concerns about Cablevision’s operating performance,” he concluded.
Bryan Kraft, analyst at Evercore Partners, similarly said: “Additionally, John Bickham, who was president of cable & communications at Cablevision, left the company in November. With the two most senior operating executives having departed, we believe Cablevision’s cable business is without strong senior operating leadership.”
He called the resignation a surprise “given that only two years have passed since Mr. Rutledge executed a new five-year employment agreement in late 2009, although we note that the one-time special cash and stock awards (totaling $18.5 million) he received at the signing of his employment contract became fully vested this month. This might be an indication that Mr. Rutledge has been planning to resign for some time.”
Some are wondering if Rutledge’s departure is a sign that Cablevision could be sold – a rumor that has recurred over the years. “While we continue to find a Cablevision sale logical longer-term, we’re skeptical that a near-term deal is in the works, as we believe the bid/ask spread remains wide,” Ratcliffe said.
What’s next for the departing executive? Ratcliffe suggested he could run another large cable operator. “Rutledge would be a very strong candidate for the open Charter CEO slot, should he want it,” he wrote. “While Rutledge did get a high degree of latitude to run the CVC cable business, we don’t believe that the Cablevision CEO job was ever a possibility” given the Dolan family controls the firm, and James Dolan has been in the CEO post.
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