Oh, look at the three month chart on that: http://finance.yahoo.c...=

Nice pick here, H. Just piggybacked on it with puts: bought a few of the Dec 25s at $2.90.

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I can't really comment on the technicals of CVC, but I am a holder of both it and MSG after doing quite a bit of due diligence and research on it at the beginning of the year. From a fundamental perspective, I wouldn't want to be short the stock. As for the Z score, did your calculations take into account the spinoff that happened 4 months ago (which is the catalyst that got me interested in the situation)? That might skew the results some.

That being said, I have reduced my CVC position a lot in the last week or two, but mostly because I've been looking at some other corporate divestiture situations....

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Homer315,

The balance sheet data for the Z"-Score came from the most recent 10-Q, which covered the period of the spin-off, (and the income statement data came from that period as well as the previous three) so the score presumably is taking the initial effects of the spinoff into account.

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Well Homer, you're selling and I'm selling, so there doesn't seem to be much of an argument if you look at it that way. :)

Would you mind sharing details about

1) Why exactly we should be so wary shorting this, meaning a summary of your well-researched bull case, and....

2) What is it about other corporate divestiture situations you've looked at that makes you wary to stay long here?

It's been quite a run up since the beginning of the year, so congrats on your profits.

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Hesperian,

I agree that since we are both selling we are sort of in agreement. If I understand your second question, you are asking me about why I wary staying long CVC, right? The fact of the matter is that I spend a lot of time investing in those situations, I have made a good profit on CVC (and even more on its spinoff MSG) and there are a SLEW of recent spinoffs (as in the last two weeks and the next two weeks) that I am interested in (including, among others, FAF/CLGX, VSH/VPG, STR/QEP, FTR/VZ, MDR/BWC and others). So in that sense, I am reducing my positions in CVC and MSG because I think that there is even more value in some of these other situations. So it's not so much that I am wary staying long with CVC/MSG but rather see even better opportunities in some other places.

As for the bull case for CVC, it has the most loyal and profitable customer base in the US, an industry leading service penetration level, higher average revenue per unit and ARPU growth despite operating in an increasingly competitive environment. It's also been succesful in increasing ARPU and shifting its users from basic cable to higher growth and profit margin digital services. In addition, there should be much better improvement in free cash flow because of the reduced need for capex stemming from the distribution of MSG (which is going to need more than $850M to renovate the stadium). From a valuation perspective, after the runup, it's only trading at about the same EV/EBITDA ratios as its peers. There are other growth opportunities for the company, including its triple play service and voice phone services.

Anyway, if you think the market in general is headed for a drop, then I doubt CVC will be immune from that, but from a fundamental perspective, I don't think the company is overvalued, and the recent announcement of the acquisition will be accretive in the next 12-18 months.

Just my $0.02.

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The insiders agree with us too, Homer, so the 3-way 'sell' consensus just gives me a warm fuzzy feeling.

I looked into the history of this company more since your post, and frankly I'm not impressed. They don't have a great track record with aquisitions, and the company doesn't seem to be run in the best interests of "normal" shareholders.

The greatest danger for shorts here is another (ill-advised) buyout offer, IMO.

As an aside, I think long-only value investors have a tendency to force themselves to see value where there isn't (such as debt saddled, high competition, low margin businesses), because the only other option is to sit on their hands, and what fun is that?

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Bid-ask on those puts is .60-.75 now. Getting hammered on this one. Will give it until the end of the month then close this out.

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