AT&T Stock Plunges Over Six Percent in Two Days
AT&T Inc. (NYSE:T) stock has been under severe pressure since the telecommunications giant announced a deal last week to acquire Time Warner Inc (NYSE:TWX) in a controversial $85.0-billion deal, as many analysts fear that the transaction will not pass the regulatory test.
Since the news broke about the deal, AT&T stock has plunged more than six percent, AT&T’s biggest two-day plunge since 2009, showing the nervousness among investors about the deal.
Advertisement
Prior to the news, the stock had climbed more than 14% this year, outperforming a five-percent gain for the S&P 500 Index. Including dividends, the stock had returned 20%.
Investors’ reaction to the news suggests that AT&T shares have a bumpy ride until the regulatory approval uncertainty gets cleared. The U.S. election made the deal more complex, as Donald Trump has said he would block the deal.
AT&T stock has been a top divided-yielding stock in the U.S., paying more than five percent yield. The company has been increasing its dividend for the past 33 years, making AT&T a must for investors seeking a stable dividend income from a top American name.
With Time Warner under its belt, AT&T will have access to world’s most premium content channels, including HBO and CNN, helping the telecom giant improve its profitability as consumers shun pay TV services and move to digital channels such as Netflix.
“This is a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers,” said AT&T CEO Randall Stephenson. “Premium content always wins. It has been true on the big screen, the TV screen and now it’s proving true on the mobile screen. We’ll have the world’s best premium content with the networks to deliver it to every screen.” (Source: “AT&T to Acquire Time Warner,” AT&T, October 22, 2016.)
Credits: Flickr.com/ Mike Mozart
The acquisition seems to be a tough sell to investors as the deal may dilute AT&T shares and will require it to borrow from the market. AT&T plans to fund the transaction by tapping into a $40.0-billion line of credit.
