Charter Communications is a case in point. The company's share price plummeted yesterday after it announced a decline in the number of broadband subscribers in the fourth quarter. This was despite the group's record levels of investment in its infrastructure.
We reported on the situation in these columns a few weeks ago, and highlighted the risks.
But as MarketScreener is also accustomed to pointing the finger at compensation policies with no head or tail - necessarily carried out to the detriment of shareholders - let's mention here another aspect of the Charter case: that of share buy-backs with unavowable designs.
In fact, until the end of 2021, CEO Tom Rutledge was putting the group even deeper into debt, so that it could buy back its own shares for between $700 and $800. In other words, insane valuation levels, but Rutledge took advantage of the artificial price inflation caused by these buy-backs to sell the shares he received via his stock options en masse.
Three weeks ago, he sold his remaining $100 million in shares. In short, shareholders' money was used firstly to finance his stock options, and secondly to artificially inflate the share price and pocket substantial capital gains. One is never so well served as by other people's money!
Tom Rutledge is now very rich. Charter's shareholders, meanwhile, are left with the baby on their hands - that is, with a mountain of debt and a competitive position that is worsening by the day in the face of telcos AT&T and Verizon, who are also committing themselves wholeheartedly to fiber and broadband.