(this is from ergo100 and is the first of 8 posts total and is the ONLY thread/post I've seen anywhere that walks thru a comprehensive analysis/understanding of the SB deal, note the dilution posts you are seeing pop up from bashers are innacurate)
In this thread I'd like to walk through the Softbank deal and see if we can get a concensus here on how this thing actually works. I can clearly see that on other message boards the deal is still not understood.
I believe I have figured out a way to walk people through to an understanding of what the deal is and what it isn't. It will be in several posts so to make it palatable.
First of all, people are for the most part thinking of this deal reversewise. They are focused on a number, a price, when they should not be. If you want to think this deal leads to a certain price.....you will remain mired in not fully understanding the mechanics of the deal. I know that's probably unpopular, but I'm going to prove it in a moment.
And, here shortly, I'll also tell you in one word, no kidding, how the deal has to be thought of......seriously, one word. There will be a lot of figuring and filling in the blanks after that one word, but it will boil down to one word .....
Ok, but that's the first thing to realize, do not look at this deal as if it leads to a certain price.....
Perhaps the easiest way to look at this is to take the 55% / 45% deal structure completely out of the discussion - it is largely (if not completely) irrelevant at this point.
New Sprint will have 4.5B shares outstanding (with the 1.5B added via the dilution part of the deal) - whether that translates to a significantly lower price is still to be determined. Simple math would indicate that pps should be lower however it really depends on how the market values "New Sprint" going forward - that's the elephant in the room right now.
Also - I think pps has not been hit harder primarily due to the SB 8B cash infusion and the resulting credit metric improvements- both of which should help Sprint (New Sprint) lower interest charges and borrowing costs going forward.
If you believe in the “New Sprint” story long term then leverage in – perhaps 25% now, 25% after the fiscal cliff is resolved (I think it will be, but don’t quote me on that – you never know what those idiots in Washington will do) and then the rest once the deal is at or near completion and we all have a bit more clarity on the new structure and strategic focus of the company