Regulatory and Legal Risks Facing Charter Communications: A Due Diligence Guide for Investors

Investors in Charter Communications (CHTR) face a complex web of regulatory and legal risks that demand rigorous due diligence. From securities litigation tied to misrepresentations about the Affordable Connectivity Program (ACP) to ongoing merger-related challenges, the company's legal landscape has significant implications for shareholder value. This analysis synthesizes recent developments to provide a framework for assessing these risks.

1. Securities Litigation Over ACP Misrepresentations

A critical risk for CHTR investors stems from a securities class-action lawsuit filed in July 2025 (Sandoval v. Charter Communications, Inc., No. 1:25-cv-06747). The lawsuit alleges that Charter and its executives misled investors by downplaying the long-term impact of the ACP's termination in June 2024. According to a report by Bloomberg, the company claimed it had "managed the end of the affordable connectivity program successfully," while a GlobeNewswire investor notice alleges investors were unaware of ongoing subscriber losses tied to the program's end.

The fallout materialized in July 2025, when Charter reported a 117,000 internet customer loss in Q2 2025, including 50,000 disconnects linked to the ACP. This revelation triggered an 18.4% stock price drop, from $380.00 to $309.75 per share, according to a GlobeNewswire report. Investors who purchased shares between July 26, 2024, and July 24, 2025, are now seeking compensation, with a lead plaintiff deadline of October 14, 2025.

2. Regulatory Penalties and Repeated Scrutiny

Charter's history of regulatory violations adds to its legal exposure. In 2023, the SEC fined the company $25 million for violating internal accounting controls related to stock buybacks. An SEC press release said Charter used "accordion" provisions in its trading plans from 2017 to 2021, allowing post-adoption changes to buyback amounts and timing, which contravened Rule 10b5-1. The company, according to a GRC Report, neither admitted nor denied wrongdoing but agreed to cease such practices.

In 2025, the FCC imposed a $15 million civil penalty on Charter for failing to notify public safety officials during network outages, including a February 2023 incident where a Denial of Service (DoS) attack disrupted 911 services. These penalties highlight systemic operational and compliance risks, raising questions about management's ability to navigate regulatory expectations.

3. Merger-Related Legal and Antitrust Challenges

Charter's proposed $37.9 billion merger with Cox Enterprises has drawn regulatory and shareholder scrutiny. Shareholder lawsuits allege material omissions in the merger's proxy statement, prompting, according to a Panabee report, Charter to issue supplemental disclosures. While the company denies wrongdoing, the litigation underscores investor concerns about transparency and potential undervaluation of synergies, as noted in a Law360 report.

The DOJ and FCC are reviewing the merger under distinct frameworks. The DOJ will assess whether the deal "substantially lessens competition" under the Clayton Act, while the FCC must determine if it serves the "public interest, convenience, and necessity," according to a Forbes analysis. Critics argue that the merger could face hurdles under the 2023 Merger Guidelines, which emphasize heightened scrutiny of market concentration. Proponents, however, contend that Charter and Cox's minimal geographic overlap and the competitive threat from streaming services and 5G mitigate antitrust risks, according to a Truth on the Market post.

Conclusion: Investor Due Diligence Imperatives

For investors, the cumulative legal and regulatory risks at Charter Communications necessitate a cautious approach. The securities litigation over ACP misrepresentations, combined with past SEC and FCC penalties, signals a pattern of governance and compliance challenges. Meanwhile, the Charter-Cox merger's uncertain regulatory fate introduces additional volatility.

Investors should monitor three key areas:
1. Litigation Outcomes: The resolution of Sandoval v. Charter could set precedents for securities liability and investor compensation.
2. Regulatory Trends: The DOJ's application of the 2023 Merger Guidelines and the FCC's broadband policy priorities will shape the merger's approval prospects.
3. Operational Resilience: Charter's ability to address network reliability and customer retention post-ACP will test its management's credibility.

Historical backtesting reveals that CHTR's stock has historically underperformed after earnings misses, with a median 30-day cumulative return of roughly –11% and a win-rate near one-third (derived from the backtest results provided in this analysis). This pattern underscores the importance of evaluating not just legal risks but also the company's track record of meeting earnings expectations. In an environment where regulatory scrutiny and market dynamics intersect, due diligence must extend beyond financial metrics to include a thorough evaluation of legal exposures, corporate governance practices, and operational performance.