Cable One, the newest cable stock on the block, had a mixed debut Wednesday, opening on the New York Stock Exchange at $450.48 per share, up about 6% ($24.98 each) from its when-issued price the previous day of $425.50 each, but losing ground in later trading.

Cable One completed it spin-off from former parent Graham Holdings at midnight on July 1, with Graham stockholders receiving one share of Cable One for ever Class A or Class B share of Graham they owned.

The stock, traded on the NYSE under the symbol “CABO,” lost some of its initial ground in later trading. It was priced at $429.22 at 10.22 a.m. Wednesday and continued to fall, closing July 1 at $399 per share, down $11.4% from its opening price and 6.2% off its $425.50 when-issued price.

Cable One debuted as the highest priced stock in the cable sector – at $450.48 it is more than  three times the price of Charter Communications and Time Warner Cable. But that is because of the small number of shares issued to the public. While the exact number is dependent on how many shareholders exchanged their Graham shares, Graham Holdings had planned to issue about 5.8 million shares of Class A stock. In comparison, Charter has 112.1 million shares outstanding and Time Warner Cable has 282.69 million outstanding shares. In addition, Cable One’s market cap is estimated at about $2 billion, compared to $19.18 billion for Charter and $49.85 billion for Time Warner Cable.

Cable One has lost about 20% of its video customer base in the wake of its decision to drop about 15 Viacom channels more than a year ago . But those losses seemed to level off in the first quarter and the company is optimistic for its future.

 “Cable One is extremely well positioned as an independent company to continue its tradition of excellent returns for its shareholders, rewarding careers for its associates and unusually high satisfaction for its customers,” CEO Tom Might said in a statement.

Graham Holdings chairman and CEO Donald Graham was equally optimistic.

“Cable ONE, which Katharine Graham called her best acquisition ever, has been centrally important to Graham Holdings for 30 years,” Donald Graham said in a statement. “And, Tom Might and much of his able management team have been part of the place even longer. We all believe Cable One will have an impressive future.”

JP Morgan analyst Philip Cusick initiated coverage of the stock with a $476 price target, adding that although it appears pricey at about 9.6 times 2016 estimated cash flow, it could “eventually be of strategic interest to larger and acquisitive cable players.”  

Cable One, the Phoenix-based cable arm of Graham Holdings, is slated to begin when-issued trading on the New York Stock Exchange on June 11, giving investors some insight into what Wall Street really thinks about small-market MSOs.

Graham Holdings announced plans to spin off Cable One in November, and the stock will officially trade on NYSE (under the symbol “CABO) on July 1. But in the meantime, investors will get an early glimpse of how the market could value the company via when–issued trading under the symbol “CABO WI.”

According to some people in the cable financial community, some investment bankers estimate the market could value Cable One as high as 8 times to 8.5 times forward looking cash flow. That would be a pretty high public multiple -- other cable stocks trade in the 7 times range -- but would be in line with the 8 times to 10 times multiples paid for public and private cable companies recently.

When-issued shares can be bought or sold like ordinary securities, except that transactions do not settle until the stock is formally issued. The attraction: trading in when-issued shares usually require a small down payment of about 25% of the value of the shares and no margin or loan debt is needed for the balance until the settlement date, which can be weeks in the future.

Cable One has been at the forefront of the battle over high-programming costs, dropping Viacom’s suite of networks – including MTV, Comedy Central, Nickelodeon and VH1 – 14 months ago after the two could not reach a carriage deal. Cable One has claimed that Viacom demanded carriage fee increases of more than 100% despite ratings declines at many of its channels. Viacom has claimed it is merely seeking fair compensation for its content.

Dropping Viacom has taken a chunk out of Cable One’s programing expenses. According to its financial statements, programming costs have dropped “significantly” since it dropped Viacom more than a year ago, but so have its customer rolls. Graham’s 10-Q first quarter financial statement filed in May stated that Cable One has shed about 20% of its video customer base (to 421,331 from 524,563 in March 2014) in the past 12 months and has placed a lower emphasis on video product sales.

“Due to rapidly rising programming costs and shrinking margins, video sales now have less value and emphasis (video PSUs were down 20% over the first quarter of last year) and programming costs have been reduced significantly,” Cable One said in the 10-Q. The company added it is focusing more on “higher lifetime value customers who are less attracted by discounting, require less support and churn less.”

The spin will be a tax-free distribution to Graham shareholders of record as of June 15, who will receive one share of Cable One stock for every Class A and Class B Graham Holdings share they own.  Earlier in June, Graham announced that Cable One also will issue about $550 million in debt, which will be used to pay a one-time cash dividend to Graham Holdings.

Graham Holdings said that its board of directors has authorized management to proceed with   plans to spin off its Cable One cable assets, a deal that could be completed next year.

Cable One, which has about 476,233 video customers in 19 states, is currently embroiled in a carriage battle with Viacom, whose networks have been dark to the operator’s customers for about seven months.  The operator, which has seen its video subscriber rolls dip 15% since Q3 2013, has said it is downplaying video in favor of broadband service. 

Graham Holdings stocks soared on the news – shares rose as much as 11.7% ($92.76 each) to $886.05 per share in early trading Nov. 14.

 “After a careful review of strategic options, we believe that a separation of Graham Holdings and Cable One will create value for the companies and our shareholders,” said Graham Holdings chairman Donald Graham in a statement. “The separation will position Graham Holdings to pursue continued growth opportunities, while enabling Cable One to focus entirely on its video, Internet and voice services and to attract a more natural stockholder base.”

The proposed transaction will be structured as a tax-free spin-off of Cable One to the stockholders of Graham Holdings. The transaction is contingent on the satisfaction of a number of conditions, including completion of the review process by the Securities and Exchange Commission of required filings under applicable securities regulations, other applicable regulatory approvals and the final approval of transaction terms by the board of directors of Graham Holdings.

In a research note, Nomura Securities analyst Adam Ilkowitz wrote that the spin could be a another step in the rationalization of the Graham family’s media holdings – they sold the Washington Post to Amazon founder and CEO Jeff Bezos for $250 million in 2013 – but also could make it easier for the cable operator to participate in industry consolidation.

“Cable One is a smaller, rural-focused cable operator that has recently struggled with programming costs and may benefit from an increase in scale,” Ilkowitz wrote.

The analyst placed a $2 billion to $2.5 billion enterprise value on Cable One, based on a 6.5 times to 8.25 times cash flow multiple. Cable One reported 2013 cash flow of about $302 million. 2013 cash flow margins of 37.4% were similar to larger operators, he wrote.  

Ilkowitz noted that Cable One’s decision to emphasize data over video could lead to further margin expansion, “though growth may prove tough.”