Shares of cable and entertainment giant Time Warner soared to record levels yesterday after the company declared a 2-to-1 common stock split.
The company's stock surged 7.21 percent or 7.13, to 106, and has traded as high as 106.13 and as low as 57.63 during the past 52 weeks. Year-to-date, Time Warner shares have climbed 71 percent.
"Since our last split more than six years ago, our stock price has grown over 260 percent," Time Warner chairman and CEO Gerald Levin said in a statement. "This strong overall growth reflects the sturdy, integrated asset mix we've assembled and the superior returns it has allowed us to achieve."
The additional shares will be issued on December 15, 1998, to shareholders of record on December 1, 1998. After the split, outstanding common shares will increase to approximately 1.2 billion (including equivalent common shares related to the LMCN-V series of common stock) and the dividend per common share will be at an annual rate of 18 cents per share.
Under the Time Warner empire fall companies that in their own right are considered big players, including Turner Cable Networks, Time, HBO, and Warner Brothers Studios.
"Combined with the financial discipline that has kept us focused on strengthening our balance sheet and the depth of talent we possess, we're confident about our ability to generate sustained growth," said Levin. "At the post-split price level, we expect our stock will become even more attractive to the retail investor."
Indeed, many analysts felt that the stock was getting out of the reach of most retail investors.
"Financially the stock split doesn't change the company's fundamentals at all," said Richard Toung, an analyst at the research firm Argus Research. "But investors who have a psychological barrier to buying a stock over $100 like splits because they think they can now buy the stock cheaper."
The company also announced that it has agreed to issue $1 billion of 30-year debt to fund part of the planned redemption in December of its higher cost Series M preferred stock. According to the lead underwriter, the coupon on the new debt issuance of 6.625 percent is the lowest for any long bond issuer in the triple B category over at least the last 30 years.