Break it down
Good start. The SEC investigated Adelphia for financial fraud. Does the excluded bank debt (as mentioned earlier) explain every single stock price decrease and increase for Adelphia between mid-1999 and 2001? Look a little deeper. Just take one peak or one valley per comment at a time.
posted by Dr. Scott @ 9/08/2005 06:56:00 PM
10 comments
10 Comments:
Adelphia's stock prices peaked around February and March of 1999, as its stock prices increased over 275 percent during this time period. On February 23, 1999 Adelphia purchased FrontierVision Partners L.P. for $2.1 billion in cash, debt and stock. The purchase added 702,000 basic cable subscribers to Adelphia's existing base. Then, Adelphia acquired Century Communications Corp. for $5.2 billion on March 3, 1999. These two acquisitions made Adelphia the fifth largest operator of cable television systems in the US, serving about 4.7 million subscribers at the time in 31 different states.
Information courtesy of:
http://money.cnn.com/1999/03/05
/deals/adelphia/
Some say that the stock market is like a rollercoaster. Relate how the marekt responded to each of these transactions.
As Andrew Harp stated on September 11, 2005, Adelphia's stock peaked in late February, 1999, as news reached investors of its acquisition of a private cable television provider, FrontierVision. Adelphia Communications Corp., which traded within the NASDAQ market, rose as high as $90/share. At the same time, the NASDAQ stood at around 2300, a low point between the months of January and March; and thus its other compository companies were not experiencing the same prosperity, or growth. On March 28, 2002, "Adelphia acknowledges that it may be liable for as much as $500 million in debt it guaranteed for Adelphia Business Solutions Inc." (www.cbsnews.com/elements/2002/07/11/in_depth_business/timeline514877_0_main.shtml). During March of 2002, the NASDAQ market was hitting an early peak for the year, before starting a 3 month decline, losing over 300 points (-15.7%), proving its unpredicatability. At these two points in time, 2/99 and 3/02, Adelphia never looked better, but then never looked worse. The rollercoaster of Adelphia started by massive growth, but then sent its riders, the investors, on a steep descent, around a loopty-loop, and then left them holding their stomachs, bankrupt.
other source:
finance.yahoo.com
I agree with what Joseph Vanaman said. Once investors heard that Adelphia made these purchases, they jumped on for the ride. As Joseph said, the market was in a slight recession, and investors were looking for a quick buck, but no one could have forseen Adelphia's demise because of unreliable financial documents. This also illustrates the important concept of reliability because investors had no prior knowledge of Aldephia's debt, and therefore the knowledge the investors did gain from the financial documents was useless. As a result, many investors were unprepared for Adelphia's lack of solvency and they lost a great deal of money in the process.
Also, on April 12, 1999, Adelphi Communications Corporation announced the signing of a definitive agreement for the purchase of the cable television systems owned by Harron Communications Corp. for $1.17 billion. It was the 3rd acquisition Adelpia in less than 2 months. Adelphia became the fourth-largest U.S. cable-TV company with about 5 million customers.
My former business teacher in high school told me that the stock market is exactly like a rollercoaster. He had told our class that in any company, stocks were bound to grow, and on the same token it will drop at some point. However, there are some stocks like PSE&G that do not increase nor decrease drastically, but have a steady path.
In response to what anna said about certain companies having relatively stable paths, there are some very large companies that have hit a ceiling and have little opportunity for growth left. An example of this type of company is Coke-A-Cola. Coke-A-Cola dominates the soda market and is worldwide. They pull in huge net incomes and have very stable stocks because there is little room left for growth and their popularity keeps stock prices from dropping. When a company loses the ability to make large growths many investors become jaded because there is no longer an attraction to investing in such a company. This is why large/stable companies like Coke-A-Cola will issue dividends to stockholders. It is both a way to reward their investors and attract new ones even with little opportunity left for growth.
In addition to the discussion about the stocks and how the stock market reacted to different Adelphia's transactions, I would like to add that after the 3rd acquisition was made with Harron Communications Corp., Adelphia's stock price increased 40% during the month of April.
No, the excluded bank debt does not mention every single stock price increase and decrease because when the increase or decrease is small it has little effect on the market. Therefore the bank debt did not mention the small increases/decreases and only mentioned the large increases/decreases because they have a bigger effect on the market.
As jdaiva stated on September 17, Adelphia made a large acquisition. The day of the transaction, Adelphia's stock rallied, closing up 3 and 15/16 to 64 and 15/16 (+6.1%). It kept NASDAQ on the positive, up 5.76 points to 2598.81, and maintained the investors' high level of anticipation as to high high the stock could rise.
Information from:
http://www.fool.com/EveningNews/1999/EveningNews990412.htm
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