Shareholders of Cablevision Systems Corp on Wednesday rejected a $10.6 billion buyout bid offered by the Dolan family, after major stakeowners said it undervalued the New York-based cable operator.

The Dolans, who already own about 20 percent of Cablevision, offered $36.26 per share -- a price that several large shareholders, including activist investor Mario Gabelli, have said was too low.

Cablevision shares fell as much as 5.5 percent to $30.09 following the news. The stock was down 1.8 percent at $31.28 by midday on the New York Stock Exchange.

Cablevision said in a statement that it did not receive enough votes at a special shareholders meeting to approve the buyout, based on a preliminary vote count that it did not disclose.

While we are disappointed that shareholders did not approve the transaction, there is really nothing negative about today's outcome, Charles F. Dolan and James L. Dolan said in a statement, on behalf of their family.

We see today's outcome as a vote of confidence in the prospects of Cablevision, its management team, its 20,000 employees and the industry's future, they said.

Gabelli and several other large shareholders have said Cablevision is worth as much as $50 a share based on its valuable New York cable systems, which serve 3.1 million households, cable TV networks, and sports franchises including the New York Knicks basketball team and the Rangers hockey team.

Gabelli, whose Gamco Investors Inc hold an 8.25 percent stake in Cablevision, on Tuesday had called for a Delaware court to determine the company's fair value.

The Dolan offer, which also has a debt component, valued Cablevision at over $5,500 per subscriber, higher than Comcast Corp's $3,600 and Time Warner Cable Inc's $3,500, according to Sanford C. Bernstein.

The bid had required approval from a majority of the minority vote, or in other words, more than 50 percent of public shareholders. The Dolan family owns 20 percent of the common stock and has a 70 percent of the voting power.

Cablevision also owns major venues including Madison Square Garden and Radio City Hall. (Reporting by Yinka Adegoke, editing by Brian Moss)