market folly

Keith Meister's hedge fund firm Corvex Management filed an activist 13D with the SEC today regarding their new position in Time Warner Telecom (TWTC).  Per the filing, Corvex has revealed a 5.77% ownership stake with 8,669,424 shares.


Activist Position

Under the "purpose of transaction" section, Meister outlined his activist intentions as follows:

"(Corvex has) had multiple conversations and meetings with the management of the Issuer to discuss the Issuer’s business and strategies and will seek to have additional conversations with one or more of management, the board, other stockholders of the Issuer and other persons to discuss the Issuer’s business, strategies and other matters related to the Issuer. These discussions have reviewed, and may continue to review, options for enhancing shareholder value through various strategic alternatives including, but not limited to, improving capital structure and/or capital allocation through increased leverage and stock repurchases or dividends, among other actions, M&A, and general corporate strategies."


Breakdown of Corvex's Position

According to the fine print in the filing, Corvex was out buying TWTC common stock as early as September 13th and then added to the position sporadically throughout November, December and January.

The majority of trades, however, are via the purchase of call options in January, February, and March and the sale of put options during the same timeframe.  Corvex bought calls and sold puts both with an $18 strike and February 24, 2014 expiration.

In total, Corvex owns 2,294,924 shares and 6,384,500 shares via underlying call options.


Corvex's Thesis on TWTC

Meister outlined the thesis on TWTC in his Ira Sohn talk this week and thinks the company could be acquired.  Meister likes companies going through change and recurring revenue businesses with possible secular growth.  The main thesis here seems to be tied to the fact that the data network industry has been consolidating.  He also owns shares of Level 3 Communications (LVLT) and looks for them to be an acquirer in the space.


About Time Warner Telecom

Per Google Finance, TWTC is "a national provider of managed network services, specializing in business Ethernet, data networking, Converged, Internet protocol-based virtual private network (IP VPN), Internet access, voice, including voice over Internet Protocol (VoIP), and network security services to enterprise organizations, including public sector entities, and carriers throughout the United States, including their global locations."

You can also see some additional portfolio activity from Corvex here.