AT&T Inc.’s sweeping transformation from Ma Bell to a multimedia titan has gone both too far and not far enough for Elliott Management Corp.
Billionaire Paul Singer’s New York hedge fund disclosed a new $3.2 billion position in AT&T, taking on one of the nation’s biggest and most widely held companies with a plan to boost its share price by more than 50% through asset sales and cost cutting.
Investors applauded the development, briefly sending AT&T shares on their biggest intraday rally in more than a decade.
For Singer, the move represents one of the biggest bets in the four decades since the hard-driving activist investor founded his firm. And it strikes at the core of the way AT&T has built its bigger-is-better empire: a costly M&A binge that has turned the carrier into one of the most indebted companies on Earth.
The proposal calls for the company to explore divesting assets, including satellite-TV provider DirecTV, Mexican wireless operations, pieces of the landline business and others.
It urges AT&T, led by Chief Executive Officer Randall Stephenson, to exit businesses that don’t fit its strategy, run a more efficient operation and stop making major acquisitions. Elliott said it would also recommend candidates to add to AT&T’s board.
In response, AT&T said it would review Elliott’s recommendations and said many of them are “ones we are already executing today.”
The carrier said it believes that “growing and investing in these businesses is the best path forward for our company and our shareholders.”
Still, investors seem to think Elliott’s plan could wring more value from AT&T. The shares surged as much as 5.2% to $38.14 in New York trading Monday. They later settled down to a 2.7% gain amid a broader pullback in the market.
But, while the position in AT&T is large, Elliott may have a difficult time pushing for change unless it gets other investors to back its stance. Its newly disclosed stake in AT&T represents just about 1.2% of the company’s total market value.
Elliott has a history of tackling some of the biggest and most high-profile companies, including EBay Inc., Pernod Ricard SA and Bayer AG in the past year alone. The AT&T investment marks Elliott’s single largest equity investment with an activist slant.
AT&T is the most indebted company in the world — not counting financial firms and government-backed entities — with $194 billion in total debt as of June, a legacy of Stephenson’s steady clip of large acquisitions.
The stock is among the top 20 most widely held U.S.-traded companies among institutional investors, according to data compiled by Bloomberg. That’s partially because of its steady dividend, which totaled $2.04 a share last year, giving investors a reliable payout in good times and bad.
Elliott’s move also put AT&T back in the cross hairs of one of its biggest critics: Donald Trump.
The president, whose Justice Department unsuccessfully opposed AT&T’s Time Warner acquisition and who has slammed CNN’s coverage of him, cheered on Elliott’s efforts.
“Great news that an activist investor is now involved with AT&T,” he tweeted.