AT&T (T) Stock Tumbles After Slashing Dividend Following WarnerMedia Spinoff

AT&T (NYSE: T) announced on Tuesday its plan to spin off WarnerMedia in a $43 billion merger deal with Discovery (NASDAQ: DISCA).

The deal will see the world’s largest telecommunications company distribute shares of Warner Bros. Discovery as a dividend of $1.11 per share, down from $2.08 per share. This means that the new payout would cost AT&T almost $8 billion a year, compared to the $15 billion that was paid out last year.

The telecom company’s stakeholders will collectively hold 71% of the merged company and will acquire 0.24 shares of Warner Bros. Discovery for each AT&T share they own.

"Rather than try to account for market volatility in the near-term and decide where to apportion value in the process of doing an exchange of shares, the spin-off distribution will let the market do what markets do best," said John Stankey, CEO of AT&T.

"We are confident both equities will soon be valued on the solid fundamentals and attractive prospects they represent."

AT&T opted for a more straightforward way to complete the merger deal in an effort to make it easier for individual investors to digest the transaction. The deal, which is expected to be completed in Q2, is set to leave AT&T with roughly 7.2 billion shares outstanding.

The move comes as a part of AT&T’s plan to invest more in 5G wireless and fiber-optic technology. Cutting down the dividend size will also allow the company to more quickly reduce debt.

Thanks to HBO Max, WarnerMedia ended the year with 74 million subscribers, outpacing its biggest video streaming rival Netflix.

AT&T stock price is down nearly 6% in pre-market Tuesday.

By Senad Karaahmetovic | [email protected]

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