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AT&T Inc. (T-PA)
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I am no accountant. I have just reviewed the difference between a spin off and a split off. Here is my takeaway. Please correct me if I am wrong.
T is transferring the value of TW and combining it with DISC to create TWD. In exchange T is receiving 40 B or so in cash and 71% of TWD. In a spin off, that 71% goes to all T shareholders at some ratio of TWD stock per T share. We own shares in both companies. We are told that the market price of T stock will go down because of the value transferred out of T but part of that decrease will be offset by the value of the newly issued TWD stock.
In a split off, T is going to offer the 71% of TWD to us, essentially asking us to sell our T stock back to T in exchange for TWD at some ratio that will be higher than the spin off ratio. It is in another sense a stock offering that will have to be priced at an exchange ratio that is high enough to induce enough T shareholders to sign up. When the spin off is done, T’s shares outstanding will go down by the number of shares that were tendered to T by T shareholders. This share reduction should support the T share price at a level higher than the decreased price that will result from the spin off. Is addition, the dividend will be higher than the dividend in the spin off due to the decreased share number.
The split off is just another way of delivering the value of TW to T shareholders. The big difference with a split off is the need to pick whether you want a pure play communications company or a pure play entertainment company, rather than having smaller stakes in both.
At first, I did not like the idea of the split off. Now, I am now not so sure. Both types of transactions are tax free.
Stankey strikes again. Now Pascal Desroches, said this morning in the Bank of America media conference that they have yet to make a decision wether to do a spin-off or a split-off with respect to Warner Media assets to be combined with Discovery mid 2022. In other words if you were counting that as a T shareholder, based on the previous information T provided, you were going to receive your prorata shares in the new entity and keep your existing T shares, YOU ARE WRONG.
If Stankey decides for a split-off you will be required to surrender your current T shares to be able to receive the shares in the new entity. As Pascal said, if we determine the value of WM assets is undervalued we go with a spin-off, on the other hand if the value of T is undervalued we go with a split-off.
In other words, you as a shareholder are going to pay for the billions in shareholder value burned by Stankey and Randall in their ill fated acquisition spree during the last decade because now they are counting on you surrendering your T shares to reduce the 2.1 Billion shares they issued to completed those transactions.
Again, Stankey can not be trusted, first he said dividends were safe while hatching a transaction to cut them in almost half. Now he is saying thru his CFO, no it is not a spin-off it could be a split-off. This add additional uncertainty and explains why this stock is 15% since the Disca deal was announced. We need a new CEO at T urgently.
So we won't get TWD shares automatically. We get cash. TWD and T will surge the first day after this whatever it is. will surge before market opens. So if we want more T shares or TWD shares, we will have to pay a much higher price for them. I want TWD shares automatically put into my account so I could benefit from the fast jump in the stock price. We are being left out of the big profits. Plus I believe T is hoping we use the dividend cash, which would have been TWD shares, to buy more T, help pump more dollars into T to help it go higher. We were tricked again.
Consumer Sentiment came in below consensus and at the lowest level in a decade.
I live around New Orleans & Cox Communications is getting blasted for their lack of internet repair services & communication to customers. I get a notice on my App that there's an outage in my area with no estimate on the repair timeline. I'm in the process of switching to AT&T & I know lots of other people are doing the same thing. One thing that is working is my mobile hotspot thru AT#$%$ an amazing feature if your internet ever goes out if you have an unlimited data plan.
THE TRUTH BE TOLD
SEPTEMBER 14, 2021 / 2:20PM, T.N. - AT&T INC AT BANK OF AMERICA MEDIA, COMMUNICATIONS & ENTERTAINMENT CONFERENCE (transcript)
Question and Answer Portion of the Conference:
“….David William Barden - BofA Securities, Research Division - MD
There's a lot that people don't know yet about the transaction. The reverse Morris trust structure that you've created could be done as a dividend, could be done as an exchange offer, a blend of the 2. We don't know what's going to be done with the $43 billion you're getting in cash as a function of the divestiture. When will we know?
Pascal Desroches - AT&T Inc. - Senior EVP & CFO
Well, first, in terms of spin versus split or in exchange. It's a decision that we are going to make as we get a little closer to the time of the separation. Our responsibility is to optimize shareholder returns. And that could be -- if we believe that the remainco, the remaining connectivity business is undervalued, it may suggest that we should do a split. If on the other hand, we think that the media business is the new media company or our 70% of it is undervalued, it may lean more towards a spin. With that said, we're going to look at all these factors as we get a little closer.
And look, you appropriately pointed out, we can do a combination of both, an exchange followed by a dividend of the balance. So all options are on the table, and we feel really good about using all those options to optimize value for shareholders. In terms of the cash we received, we've said, our intention is to delever our balance sheet and to get below 2.5x, 2.5x or below by the end of 2023. So you can take that to suggest what we will do with the cash.
David William Barden - BofA Securities, Research Division - MD
Got it. And so another question related to this is AT&T was a dividend payer, grew its dividend for 35 years in a row, didn't grow its dividend last year, and then with this split, effectively will reduce its dividend to a midpoint $8.5 billion relative to about the roughly $14.5 billion that it pays out today. The retail investment community that owns AT&T, that owns the majority of AT&T is pretty disappointed about this. What can you do to sell this idea that we're creating value by doing a split, which I believe we are? What can you do to sell this idea that value is being created even though the dividend is being reduced to the noninstitutional investment community?
Pascal Desroches - AT&T Inc. - Senior EVP & CFO
Dave, if you look at the components of our business and with the separation of WarnerMedia, if you -- based on where Discovery is trading now, you can surmise what the value of the remaining -- of the connectivity business is. And if you look at that in juxtaposition to the $8.5 billion of potential dividend, the yield would suggest somewhere in the 5.5% dividend yield, which is candidly better than all of our peers and better than most companies. So we feel that we are -- we will still have a very attractive dividend post separation. And for those who want to participate, thereis an opportunity to achieve growth through continuing to hold WarnerMedia. So there -- or Warner Bros. Discovery stock. So there is an opportunityhere to achieve an attractive yield and dividend plus really nice growth in value through appreciation of new media assets…."
Just listened to Pascal Desroches BofA webcast and was apalled by the sneaky way that management is still playing dirty tricks with shareholders.
The original deal was advertised/baited as a SPIN_OFF which to me made sense for existing shareholders since while absorbing the loss of RS and BOD 10 year reign of value destruction, the WBD shares that would be distributed would offer an opportunity for recapturing the loss and maybe even make some money (god forbid) as the new company will be properly managed by the very capable team of Malone and Stanslav.
Now Mr Desroche (whom BTW it did not answer questions very articulately for a CFO) nonchalantly disclosed that the break my be a SPLIT-OFF rather than SPIN_OFF as if it made no difference to what shareholders are getting.
The difference between the 2 has already been debated on previous posts and there is no need to rehash but this latest doublespeak is nothing short of another screw the shareholders act.
I've been positive on all that has gone on overlooking the sneaky way in which the BOD got themselves re-elected last year and how Stankey reversed his stance and cut the dividend just weeks after he stating that retaining it was one of the very top priority just a couple of weeks earlier but this latest reversal is the straw that breaks that camel's back.
We need shareholders to revolt against this BOD and management to stop this latest swindle. We must wrest the company that we have paid for away from them and do all that can be done legally to stop them from siphoning even more value out of our hides.
I came out last week on at least half my portfolio, booking profits and taking some losses. I've made 12.5% in 3 qtrs and that's enough for me. I see a correction of 20% over the next 6 months beginning this last qtr 2021. Holding just energies, pipes and emerging mkts and hedged with QQQ puts. I don't need T on my plate. If I want more of anything I'll buy more pipes.
So, isn't this next dividend declaration the last opportunity to not give up Dividend Aristocrat status? There won't be another dividend in 2021, so if they don't go to $0.53, they will lose that status this month.
I know they have already implied they will lose the status, but one might be thinking it would be next year.
No, it would be this month when they announce the dividend, if they stick with $0.52.
What happens then? Seems like it is quite newsworthy, and there will be a lot of press about it whatever happens.
I see no reason for them to increase the dividend, unless they don't want the stock to take yet another hit.
The T BOD is supposed to be working for shareholders. They aren't. Likewise, the government is supposed to be working for the citizens. They aren't, either.
Huge capital gains tax increase at just $400K income. Wow. I'm sure all that revenue will be spent wisely on social engineering and climate control projects. This is so anti-capitalism I dont know where to start..
Comment from my brokerage company-
“With the quarterly option expiration coinciding with the SPX siting right at the 50-day Simple Moving Average, next week is likely to bring a breakout move in one direction or the other.”
AT&T would pay an annual dividend payout ratio of 40% to 43% from a projected FCF of at least $20 billion in 2023 which equates to $8B-$8.6B in dividend payouts. What if FCF is 16B? Will they payout 40%-43% on 16B or still keep the dividend payout 8B-8.6B?
If all the talk about spin-off vs split-off was bad, the price would not be up today.
Wow, FANG has a $14.5B market cap and they just announced a $2B share buyback. There are 181M shares outstanding and at $80, that represent about 25M shares to buy back. The stock closed at $75.66 last Thursday and right now it's $84.40 After Hours. I'll take an 11% gain in a week anytime!! WOO HOO!!
NFLX rocketing higher. Trading at 63x trailing. If you look at the spinoff as a discreet transaction i.e. without considering T's history, or mgmnt or anything else....you have to conclude that this was the right decision, and in theory, should absolutely unlock shareholder value. The fact that it is not working (thus far) is obvious and the reasons myriad I suppose. But in theory, creating a pure play media company in order to realize the valuation of a media company, was absolutely the right decision. Keep in mind, an outright sale of warner would also have unlocked value, in theory, and maybe even more so since it would've been less opaque. I assume they got no takers.
If I was going to trade T right now I'd sell Oct 29 $27 Puts for .70 each. The worst that could happen is I'd have to pay $27 per share on Oct $29 if T closes at or below $27 by then. The best that could happen is if T closes higher than $27 on Oct 29, the Puts would expire worthless and I'd get to keep the .70 premium per share which is a lot more than the .52 dividend. And I'd do it all in a month and a half rather than waiting three months for the dividend. That would be the trade to make.
$27 is a concrete floor. Sell all the Jan. $26 Puts you can & make a pretty penny.
Guess what T is RED form a pop of ~ 25 cents to 3 cent loss in just over 1 hour
Funny, Yahoo will leave the phony "stock newsletter" posts, but delete political posts about events that just might bear on the share price. smh.
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