Charter Gains in First Trading Day

Charter Communications Inc., the U.S. cable-television operator controlled by billionaire Paul Allen, rose 20% in its first day of trading after raising $3.23 billion in an initial stock sale.

Charter, which will be the nation’s fourth-largest cable operator after pending acquisitions are completed, rose $3.75 to $22.75 in trading of 115.7 million shares.

Allen, 46, who co-founded Microsoft Corp. with Bill Gates, is turning to the public markets to pay down debt and finance part of the $13 billion in cable purchases that Charter announced this year. Investors are betting on Allen’s vision of a “wired world” in which cable lines will be the digital pipeline into homes and businesses for new communications services such as interactive TV and high-speed Internet access.

“Given Paul Allen’s background, investors may be looking to catch the next wave of his vision, the wired world, which he has centered around cable and Charter,” said CIBC World Markets analyst Aryeh Bourkoff.

Monday, the St. Louis-based company sold 170 million Class A shares at $19 each. Goldman Sachs Group Inc., the investment bank that led the sale, initially set the expected price at $17 to $19.

Allen, who said he’d make a $750-million investment in the company along with investors, will keep about 95% voting control through his Class B shares, according to the IPO registration statement.

Like Charter, other big cable operators such as AT&T; Corp., Cablevision Systems Corp. and Cox Communications Inc. have been acquiring local systems at a furious pace this year in an effort to build up regional groupings. Charter is lagging the industry in upgrading its network to handle the most advanced digital services and must spend about $5.5 billion over the next three years to complete that work, analysts said. That’s one reason its shares traded Tuesday at a discount to cable companies such as Comcast and Cox.

Charter traded at about 15 times its projected 2000 cash flow, analysts said. Cox and Comcast were trading at more than 18 times projected 2000 cash flow.

If its shares rise, though, Charter could own a strong currency to fund more acquisitions, setting the stage for a new round of the kind of consolidation that has characterized the cable industry this year.

“Within 12 to 18 months, Charter could potentially make a run at a larger cable company, including Adelphia or Comcast,” analyst Bourkoff said, referring to Comcast Corp. and Adelphia Communications Corp. “But that’s clearly predicated on an increase in Charter’s market value.”