“Activist” Takes A Stake In Cablevision (CVC): Why Bother?

Harbinger Capital Management recently disclosed a 4.9% stake in Cablevision (NYSE: CVC), the broadcasting empire that has been criticized for a its self-serving, family-run management.

The Wall Street Journal quotes a few analysts who read great meaning into this investment:

"Everybody was wondering why Jimmy got religion all of a sudden. Now we know why." – Craig Moffett, an analyst at Sanford C. Bernstein & Co. "

"The Dolan family may be trying to head off a public ‘war-of-words’ in the media." – Richard Greenfield, an analyst at Pali Capital.

Here’s the thing: the company’s dual-class voting structure means that the Dolan family controls 75% of the voting rights, giving it full control over the board of directors and the company’s future. Philip Falcone, the guy who runs Harbinger, can make all the noise and demands he wants, and he might even get a couple seats on a family-controlled board. But any ideas that Falcone has are the equivalent of going up the CEO in a bar and telling him how he should run the business. Maybe he’ll do what you suggest, and maybe he won’t. He’ll do whatever he wants, and Falcone’s stake isn’t going to accomplish anything.

Harbinger has, inexplicably, developed a track record of taking an activist stance at tightly-held companies with dual-class voting structures. Back in March he secured 2 of the 15 seats on The New York Times Co.’s (NYSE: NYT) board of directors. I commented that "the problem is that having 2 seats on a 15-member board won’t provide any additional leverage, as far as I can tell.This quixotic activist campaign, however noble, is likely to result in a big fat nothing." So far that’s certainly been the case, and it will likely will be at Cablevision too.

There might be really good reasons to buy shares in Cablevision — but Harbinger’s stake isn’t even close to being one.

Zac Bissonnette