Shareholders have two choices, with the second choice having two parts. This now forces shareholders to make a decision about their current shares of T. In the end, you would have shares of T and shares of the new entity.Ī split-off is different because T would offer shares of the new entity to their shareholders in this case. If a shareholder had 1,000 shares of T, after the spin-off, they would still have their 1,000 shares of T and however many shares of the new entity that those 1,000 shares entitled them to. In a spin-off, the existing company T would distribute shares of WarnerMedia/Discovery ( DISCA) to their existing shareholders by a special dividend. A spin-off distributes shares of the new company to the existing shareholders, while a split-off offers shares in the new company to shareholders against their current shares. A spin-off and a split-off are different methods a company can utilize to divest an asset/business unit with the overall goal of creating shareholder value. I will try to explain this as simply as possible. It looks like everything will be unveiled during their upcoming investor day conference, but who knows. I am annoyed and frustrated because management should have had the plan drawn up and indicated the structure by now. If a spin-off occurs, people will complain they would have made out better under a split-off and vice versa. Now that it's in the open, we're going to have unhappy shareholders either way. The worst thing John Stankey could have done was say the board was undecided about the deal structure. Stankey did today was add another layer of confusion to the mix by stating that the board is contemplating a spin-off or a split-off, and while both have benefits, sometimes choices aren't a good thing.ĪT&T Spin-off or Split-off, what are they, which do I prefer Look, I am not selling my shares regardless of the structure, and I added more at $23, but come on already. The WarnerMedia transaction was announced May 17 th, 2021, and we still don't have specifics. Regardless of T's numbers, which I believe were great, I am frustrated beyond belief because we are still in the dark on the specifics of the WarnerMedia deal. Walk around NYC, get on a train, or ride a subway, everyone is on a cell phone, and this isn't going to change. Who in their right mind would be unhappy with generating $0.2756 in cash from operations out of every $1 of revenue? T certainly isn't one of the disruptive growth companies that Ark-Invest would invest in, but it has become a digital-age utility company generating large amounts of revenue, profit, and FCF. From a numbers standpoint, nobody should be mad, in Q4, T delivered $41 billion in revenue and generated $11.3 billion in cash from operations. T delivered growth in Mobility, fiber, HBO, achieved billions in cost savings, and generated $26.8 billion in FCF in 2021. Shares of T started the day positive as their earnings were strong, but after John Stankey discussed the possibility of going with a spin-off or split-off in regard to the WarnerMedia deal, shares sold off and never looked back, closing at $24.25 after trading as high as $26.98.Īt this point in time, I could be one of their most frustrated shareholders. With the Fed raising rates in 2022, you want to be in names that generate large amounts of FCF. STEVE SPLITT FREEDon't let the headlines fool you, T has a printing press that churns out billions in free cash flow (FCF) and profits. I was really excited when I read through the earnings report and cringed when I read the earnings call transcript. Unlike many stocks that got hammed during the market turbulence T started to get its rhythm back going into earnings. Shares had bottomed out at $22.02 on 12/15/21, and we experienced a mini runup over the next month, reaching $27.31 on 1/18/22. Just when things were starting to come together for shareholders of AT&T ( NYSE: T) we got knocked right back down. Jetcityimage/iStock Editorial via Getty Images
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