Technology

Wall Street sends Sprint/T-Mobile merger a big raspberry

Investors' concerns about regulatory obstacles to Sprint's planned merger with T-Mobile hurt both companies' stocks Monday.
Investors' concerns about regulatory obstacles to Sprint's planned merger with T-Mobile hurt both companies' stocks Monday. Bloomberg

Investors greeted the long-awaited merger announcement by Sprint and T-Mobile by punishing both companies.

Shares of each were off sharply after the rivals announced they would seek government approval to combine the nation's fourth and third largest wireless carriers.

Sprint shares were down 85 cents, or 13.1 percent, at $5.65 in morning trading. One analyst had said the terms of the merger essentially valued Sprint stock at $6.62 a share.

Shares of T-Mobile were off $3.47, or 5.4 percent, at $61.04.

Wall Street's thumbs-down response surprised at least some analysts.

The benefits of merging would simply increase the value of both companies' stocks, compared with the companies competing on their own, according to Jonathan Chaplin of New Market Research.

Read Next

Sprint CEO Marcelo Claure and T-Mobile CEO John Legere announce that the two companies have reached an agreement to come together to form a new company - one that will deliver the first 5G nationwide network.

"With what we think the market’s view of standalone values, synergies and deal odds are, we would expect both stocks to be up on Monday (TMUS to $75, and Sprint to $7, respectively)," Chaplin wrote clients in a note Sunday.

Chaplin sees even higher values for shares if the deal wins regulatory approval but said those gains will wait for a win in Washington. The difference approval makes will be greatest for investors in Sprint shares.

Read Next

"We would note that Sprint has more upside in the event that the deal closes because it has more downside in the event that it fails," Chaplin wrote.

Analyst Craig Moffett had told investors to expect volatility in both companies' shares though terms of the deal announced Monday contained essentially no surprises. He puts the odds of government going along with a merger at 50-50, which means traders may push share prices up and down as those odds seem to shift.

Here's a timeline outlining Sprint's on-again, off-again merger talks since 2014. On April 29, 2018 Sprint and T-Mobile announced the two were merging.

  Comments