AT&T soars after activist hedge fund announces $3.2 billion stake, says it could be worth 50% more
- Shares of AT&T spiked as much as 8% early Monday after Elliott Management announced a $3.2 billion stake in the company.
- The activist hedge fund said in a letter to AT&T's board of directors that the has a "compelling value-creation opportunity," and that it predicts shares could rise past $60 by the end of 2021. That would be a roughly 50% increase over current levels.
- Elliott's letter proposes a plan called "Activating AT&T," which focuses on improving operational efficiency, honing strategic focus, and applying a formal capital allocation framework.
- The firm also said "AT&T shareholder returns have been disappointing over a prolonged period."
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AT&T's stock price spiked 8% on Monday morning after Elliott Management - one of the largest activist investors in the world - revealed a $3.2 billion stake in the company.
Elliott said in a letter to AT&T's board of directors on Monday that it believes the company has a "compelling value-creation opportunity," and that it expects shares could reach more than $60 by the end of 2021. That would be a roughly 50% increase over current levels."There is a great deal at stake in ensuring that AT&T realizes its potential - for shareholders, for consumers, for employees, and even for the US as a global telecom leader," Elliott said.
The letter proposes a four-part plan dubbed "Activating AT&T" which includes improving the company's operational efficiency, strategic focus, and applying a capital allocation framework.
Elliott also said "AT&T shareholder returns have been disappointing over a prolonged period," citing company's M&A as the primary culprit. The telecommunications company shelled out more than $100 billion for Time Warner in 2016, and Elliott doesn't seem sold on the purchase.
"AT&T has yet to articulate a clear strategic rationale for why AT&T needs to own Time Warner," the firm said. While it is too soon to tell whether AT&T can create value with Time Warner, we remain cautious on the benefits of this combination."
The fund also referenced AT&T's failed purchase of T-Mobile, and its acquisition of DirecTV in 2014 , as damaging to the firm's overall business.AT&T was up 27% year-to-date through Friday's close.