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Elliott Mgmt Has a Plan to Grow AT&T (T) by 65%

Mark Vickery

Monday, September 9, 2019

Leading the market headlines to kick off a new week is a letter from activist investment firm Elliott Management to AT&T T, in which the firm owns 1.2% of the telecom giant’s market cap, or $3.2 billion. Though details are fuzzy, Elliott is vying to have AT&T’s board of directors restructure its businesses, which Elliott calculates would generate share price gains of 65%.

In what is being advertised as a “value-creation opportunity,” Elliott speaks of AT&T — which bought media major Time-Warner’s assets for $85 billion in June 2018 — as being “deeply undervalued.” Though shares of the Zacks Rank #3 (Hold)-rated company have swung up 22% year to date, this was from a multi-year crater in share price that bottomed the last week of December last year.

Would paying down its significant debt be the main crux of a new plan from Elliott? Its founder Paul Singer has specialized throughout his career in making distressed-debt acquisitions. Perhaps a plan to sell off assets like DirecTV, and/or attempt to wring significant revenues out of Time-Warner — which owns CNN, Warner Bros. film studios and HBO — is more what the investment firm has in mind. We’d like to hear from John Stankey on this matter — he has been running the WarnerMedia wing of AT&T since that acquisition took place.

Shares of AT&T had been up as much as 10% on the news in today’s pre-market. They have since simmered to roughly +5% a half hour before the opening bell.

Trade War Having Negative Affect on China

Chinese Imports fell 5.6% for the month of August, according to a report from Beijing released yesterday. Exports to the U.S. fell even further, down 16% on the month, with Exports overall down 1%. Imports from the U.S. sank 22.4%. This marks the fourth straight month of falling Import & Export data out of China.

Analyst had been expecting something of a pop in monthly trade data, but it would appear the takeaway is that the trade war with the U.S. is having a heavier affect on the world’s second-largest economy that originally surmised. In addition, more support is expected from the Chinese governments to free up liquidity; on Friday, capital reserve requirements were loosened for the nation’s banks.

All this comes before the latest ratcheting up of tariffs on both sides of the Pacific a week ago; if we think things are bad in this data now, just wait until future tariffs hinder trade activity.

Mark Vickery
Senior Editor

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