Activist investor Elliott Management has taken a $3.2bn stake in AT&T, one of its largest-ever positions, and is pushing for a strategic overhaul at the US telecoms group, which it says has been a “disappointing investment for shareholders”.
Paul Singer’s $38bn hedge fund has taken aim at AT&T’S merger strategy, including its $80bn takeover of Time Warner, saying the US telecoms group has embarked on a “questionable” acquisition strategy.
“What has attracted our attention, as well as the attention of other shareholders . . . has been the prolonged and substantial underperformance of AT&T as an investment relative to its potential,” Elliott partner Jesse Cohn and associate portfolio manager Marc Steinberg said in a letter on Monday to AT&T’S board.
Over the past decade, the company “has not only failed to keep pace with the broader market, but has actually underperformed by over 150 percentage points”, they added.
The size of the AT&T stake is one of the biggest ever taken by Elliott or any activist hedge fund. Elliott, one of the most formidable and prolific activist investors, has grown larger than any of its rivals, allowing it to build a war chest to take on companies the size of AT&T, which has a $275bn market capitalisation.
Shares in AT&T were up more than 4 per cent to as high as $38.14 in early Wall Street trading. Elliott says its plan will see AT&T’S share price go above $60 by the end of 2021.
Donald Trump, who was critical of AT&T’S takeover of CNN owner Time Warner last year, cheered Elliott’s move, urging them to overhaul CNN’S coverage of the White House.
“Great news that an activist investor is now involved with AT&T,” he tweeted. “As the owner of VERY LOW RATINGS @CNN, perhaps they will now put a stop to all of the Fake News emanating from its non-credible ‘anchors.’ Also, I hear that, because of its bad ratings, it is losing a fortune.”
Elliott said it sees an “irreproducible collection of leading businesses” at AT&T, including its wireless business and its media franchise.
The fund managers praised the company’s “rich and pioneering history” and its “hard work, ingenuity and passion of its dedicated employees”. The fund asked for a meeting with the company and was seeking to work with them, it said.
In the letter, Elliott outlined a four-part plan to tackle what it described as the company’s long-term underperformance by increasing strategic focus to win back market share of wireless revenues, improving operational efficiencies and cost-cutting and enhancing the company’s leadership by stemming the tide of executive departures.
After buying Time Warner, AT&T appointed John Stankey, a company veteran, to run its entertainment business. Mr Stankey has overseen a tumultuous management shake-up as three of the four leaders of Time Warner have left — an exodus that Elliott described as “alarming”.
HBO chief Richard Plepler quit after determining he would not be given the same level of independence in the new regime, while Turner head David Levy also left. Mr Stankey initially promoted Kevin Tsujihara, the chief of the Warner Bros film studio, only to see him abruptly resign two weeks later in light of misconduct allegations. Mr Plepler’s exit in particular raised alarm bells with analysts, because he had been credited with leading HBO’S successes through the past decade.
