If you own many shares of the stock, it is a definite hold and wait. The merger could increase the share price, but the company will not likely increase the dividend rate anytime soon.
Full Answer
What will happen to AT&T stock after its merger with WarnerMedia?
First, the company will create a new company called Warner Bros. Discovery through a merger between its WarnerMedia subsidiary and Discovery Inc. (NASDAQ: DISCA ). It will then spin off 71% of those shares to AT&T shareholders. This will have a major positive effect on T stock.
What will happen to AT&T shareholders when it spinoffs?
But based on the brief description it shared in a May 17 press release , investors could end up with three possibilities: A spinoff: Shareholders receive a cash dividend, or get some ratio of WBD shares for each share of AT&T they hold.
Will AT&T’s dividend cut hurt T stock?
Second, AT&T’s DirectTV unit has been carved out to a private equity firm. With no media assets associated with the remaining wireless company, AT&T will cut its dividend by about 50%. I talked about this in my last two articles on AT&T. The cut will have a negative effect on T stock.
How much will AT&T spend on its dividends after the merger?
It expects the slimmer AT&T to only spend about $8 billion of its annual free cash flow on dividends after the deal closes, compared to nearly $15 billion last year. Image source: Getty Images. In other words, AT&T will cut its dividend nearly in half and end its 36-year streak of annual dividend hikes.
See more
What happens to my att stock after merger?
While AT&T shareholders will still own the same number of AT&T shares after the transaction close that they did just before the transaction close, the company's stock price is expected to adjust after the deal is complete, reflecting the spinoff.
What does the AT&T merger mean for stockholders?
AT&T's WarnerMedia will represent 71% of the newly formed Warner Bros. Discovery, and its shareholders will receive approximately 0.24 shares of the new company for each share of AT&T stock owned. Before that happens, you will have the opportunity to decide whether you want to own just AT&T or Warner Bros.
How will AT&T spin off affect shareholders?
AT&T shareholders do not need to take any action. Their WarnerMedia Spinco shares will automatically be exchanged for WBD common stock in the merger, which will occur on the closing date of the transaction.
What will AT& t shareholders receive from Discovery merger?
For each share of AT&T common stock, holders will get 0.24 share in Warner Bros Discovery. AT&T's stock will begin two-way trading on April 4, with shareholders getting the option to buy or sell shares of AT&T with or without the WBD shares.
Is AT&T a good buy now?
AT&T stock (NYSE: T), which currently trades at $21 per share looks like a good investment opportunity at the moment. The stock remains up by around 12% year-to-date, considerably outperforming the broader S&P 500, which remains down by about 18% over the same period.
Is ATT stock going to split?
AT&T Time Warner Split Off AT&T shareholders will control 71% of the combined company, with $10s of billions of freed debt from the parent company. This will result in roughly 0.24 shares per current AT&T shareholder.
Is AT&T a buy sell or hold?
AT&T has received a consensus rating of Hold. The company's average rating score is 2.44, and is based on 8 buy ratings, 10 hold ratings, and no sell ratings.
Is AT&T a safe stock?
AT&T's Poor Dividend Safety Grade Notably, the D rating assigned to AT&T results in a substantial amount – 47%. As I wrote in How Our Dividend Grades Averted 99% Of Dividend Cuts, reliable payouts are a top priority for income investors, and in this inflationary environment, dividend stocks are golden.
What does spin-off mean in stocks?
In a "spin-off," a parent company distributes shares of a subsidiary to the parent company's shareholders so that the subsidiary becomes a separate, independent company. The shares are usually distributed on a pro rata basis.
How much stock will AT&T shareholders get?
0.24 sharesOn the closing date of the transaction, each AT&T shareholder will receive, on a tax-free basis, an estimated 0.24 shares of the new WBD common stock for each share of AT&T common stock held as of the record date for the pro rata distribution.
Who owns the most AT&T stock?
The Vanguard Group, Inc.Top 10 Owners of AT&T IncStockholderStakeShares ownedThe Vanguard Group, Inc.7.78%556,731,650BlackRock Fund Advisors4.92%352,246,290SSgA Funds Management, Inc.3.91%279,661,848Newport Trust Co.2.76%197,426,1526 more rows
How much debt does ATT have?
AT&T's Debt Analysis The image below, which you can click on for greater detail, shows that at December 2021 AT&T had debt of US$182.1b, up from US$155.2b in one year. On the flip side, it has US$21.2b in cash leading to net debt of about US$160.9b.
What happens after a merger?
After a merger is complete, the new company will likely undergo certain noticeable leadership changes. Concessions are usually made during merger negotiations, and a shuffling of executives and board members in the new company often results.
What is merger agreement?
Key Takeaways. A merger is an agreement between two existing companies to unite into a single entity. Companies often merge as part of a strategic effort to boost shareholder value by delving into new business lines and/or capturing greater market share.
Why do share prices rise during a pre-merge period?
In contrast, shareholders in the target firm typically observe a rise in share value during the same pre-merge period, mainly due to stock price arbitrage, which describes the action of trading stocks that are subject to takeovers or mergers. Simply put: the spike in trading volume tends to inflate share prices.
Why do shareholders of both companies have a dilution of voting power?
The shareholders of both companies may experience a dilution of voting power due to the increased number of shares released during the merger process. This phenomenon is prominent in stock-for-stock mergers, when the new company offers its shares in exchange for shares in the target company, at an agreed-upon conversion rate .
What is the merger of AT&T and Time Warner?
The merger would combine AT&T’s wireless and video infrastructure with Time Warner’s content business, including cable channels HBO, TNT, CNN, and TBS . It would make the combined corporation the No.1 U.S. telecommunications company in terms of subscribership (over 108 million customers).
Is AT&T's dividend cut bad?
This effectively kicks it out of the “dividend aristocrats.”. Jim Cramer, from Mad Money, stated that he thinks AT&T’s dividend cut is very bad. “Corporate America does things that would never happen in the NFL.
Debt Paydown Is the Third Benefit to T Stock Holders
However, there is a third positive event that will help the remnants of AT&T, and by extension its shareholders. Once it receives all the regulatory sign-offs it needs to close the merger, AT&T will receive $43 billion in payments from the new Warner Bros Discovery company.
Scenario Analysis for T Stock
Keep in mind that this is just one possible scenario. We don’t know the exact spin-off ratio for Warner Bros. Discovery shares (let’s give it the symbol WBD.) But we know that the remaining company’s stock (T) will fall by the dollar value amount of the WBD spin-off. Additionally, the T stock dividend will be cut and this could also make it drop.
What to Do With T Stock
You can probably see that the best returns will likely accrue for shareholders that hang on to both their AT&T shares and their Warner Bros. Discovery shares. That is what long-term investing is all about. However, there could be some pain in the short-term, as many shareholders don’t like to deal with change.
Key Points
To pay down its massive debt, AT&T is selling DIRECTV and spinning off WarnerMedia into a merger with Discovery Communications.
What Warner Bros. Discovery might be worth
Analysts believe that WBD will be worth $7 to $8 per share of AT&T stock. In an interview with Yahoo! Finance on May 24 , AT&T's CEO, John Stankey, seemed to confirm those educated guesses.
How AT&T's breakup might play out
Unfortunately, most AT&T shareholders won't wait around to figure all of this out. Once they receive their unfamiliar WBD shares, many will likely sell. That usually happens with spinoff shares , although in the long term, spinoffs tend to do quite well .
What investors in AT&T stock should do
AT&T's price will fall by $6 to $7 -- the price of each new WBD share -- once the spin-off/split-off occurs. With a new price around $22 to 23 per share, and a dividend around $1.16, that would give AT&T a 5% to 5.3% dividend yield .
What Are Mergers and Acquisitions?
First things first: It’s essential to understand what these activities typically entail so you can see the different levels at which they can impact your investments. Mergers are business arrangements in which two or more existing entities join together to form a completely new company.
How Do Mergers and Acquisitions Affect Stock Prices?
There’s no rulebook that can accurately dictate the ways mergers and acquisitions will affect stock prices; the results aren’t always consistent or predictable. Often, mergers and acquisitions are symbols of new beginnings and new opportunities, but some companies enter into these agreements under unfavorable circumstances.
Should Shareholders Worry About Dilution of Voting Power?
When you own shares of a company’s stock, you have the right to vote on certain corporate actions and other matters that affect the company’s operations. One result of mergers and acquisitions is that there’s often a loss of this voting power for shareholders. Consider the example of a pizza party. The pizza is cut into 16 slices.
Stock Strategies for Mergers and Acquisitions
Should you change your stock strategy due to an impending merger? That depends upon both your portfolio and the market. There will be temporary increases and decreases in the value of stocks of both the original companies. You may be able to profit by trading wisely based on the temporary fluctuations in stock value.
What is AT&T and Time Warner?
AT&T and Time Warner, out of nowhere, announced an $80 billion merger that would combine the telecommunications giant with the sprawling media company. AT&T is best known these days for its mobile service, but it also operates DirecTV, U-verse cable television, landlines, and provides broadband internet in some parts of the country.
Does Time Warner own Hulu?
Time Warner owns a 10% stake in Hulu, alongside Comcast, which means two bitter rivals for your cable dollar are now begrudgingly “friends” insofar as the streaming service is concerned. Just what, exactly, this means for Hulu is a bit up in the air. AT&T will probably honor any contracts Time Warner has with Hulu, and the ownership stake is fairly important for pushing certain Time Warner properties. Still, now Hulu is in the unenviable place of potentially being part owned by a direct competitor; AT&T might resolve the problem by selling off its stake, but that would also leave AT&T with no obligation whatsoever to provide Warner Bros. content, like the Adult Swim shows, to Hulu.
Does AT&T own Hulu?
AT &T will probably honor any contracts Time Warner has with Hulu, and the ownership stake is fairly important for pushing certain Time Warner properties. Still, now Hulu is in the unenviable place of potentially being part owned by a direct competitor; AT&T might resolve the problem by selling off its stake, but that would also leave AT&T ...
Does AT&T own CNN?
Now it may own HBO, TBS, and CNN, plus all the related channels — ten major cable networks in all, not to mention a stake in the broadcast network The CW.
