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Why Did Charter Communications, Inc. Stock Climb 12.7% in March?

By Daniel B. Kline - Apr 6, 2016 at 2:32PM

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The company got some good news or at least a report of imminent positive news.

Since it made the deal to acquire Time Warner Cable (NYSE: TWC) for $78.7 billion in May 2015, Charter Communications (CHTR 1.41%) has been biding its time, waiting for a Federal Communications Commission (FCC) ruling on the deal.

Now that approval appears imminent, the company's stock has spiked.

Data source: YCharts.com.

What: Even though most analysts following the cable industry believed that FCC approval was inevitable, there was also the possibility that the agency either said no or gave a highly conditional yes. Because of that, when stories broke on March 17 that approval was forthcoming, the company's stock shot up. 

After closing February at $179.56, Charter stock bounced around the $180s until mid-March when news of the impending approval broke. That sent the stock on a tear to close the month at $202.43, a 12.73% gain, according to data provided by S&P Global Market Intelligence.

So what:  While the approval was expected, the good news from Charter is that the FCC's list of conditions for the deal appears to fall into the expected. In any merger of this size, the agency will add pricing contingencies and conditions that the new company cater to underserved markets. In some cases, however, the FCC asks combining companies to sell certain assets or submit to terms that impede how it does business going forward.

That does not look to be the case here as the leaked reports of the FCC's impeding action appear to contain no big surprises.

Now what: If the merger proceeds as expected, Charter moves from a waiting game fairly quickly into "What have you done for me lately?" territory. The company will no longer be judged based on the possibilities offered by the merger but by how it executes the deal.

That's a criteria fraught with both peril and the opportunity for success. The combined company should be a technological innovator that also manages to deliver operational efficiencies that save it money. If it can pull that off, then the stock will continue to rise. If the new cable/broadband giant stumbled in joining the two brands, then this could be a short-term high.

The waiting game is about to be over, and it's time for reality to set in.

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