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ok but, doesn't it ideally increase AT&T's value over time (else why would they be acquiring)? meaning, if the acquisition goes as planned, wouldn't you be bett
by catshirt 10y ago
ok but, doesn't it ideally increase AT&T's value over time (else why would they be acquiring)? meaning, if the acquisition goes as planned, wouldn't you be better off holding onto AT&T?
- charlesdm 10y agoYes, over time. Not today. There are a lot of unknowns, because every deal usually starts from an idea, e.g. we're going to acquire X for $10bn, and that will give us $1bn in extra profits + $2bn in synergies after integration. But they need to integrate the company first to achieve those results, meaning it's unknown, meaning it can fail, meaning there's a risk premium. Half of what determines the price of a stock on the stock market is psychology. It's a herd.
- catshirt 10y agothanks! my rudimentary understanding was pretty much correct... it sounds, then, like shareholders simply don't have faith in the acquisition?
- charlesdm 10y agoIt depends. If AT&T spends a lot of cash today, the intrinsic value of a single share goes down, because there is less cash to return to that shareholder tomorrow. However, if it looks like the integration is going well, the price will increase, since indeed the company will be more valuable. In the event of a deal, Time Warner shareholders are getting a cash premium SOON. So the price goes up.