Sprint Corp (NYSE: S) is having an overwhelmingly rough start to the trading session this morning. After news broke that T-Mobile (NASDAQ: TMUS) has entered into an agreement to acquire the company, concern started to fill the air, leading to declines. However, what are investors concerned about? Acquisition news usually sends a stock climbing. Today, we’ll talk about:
- The acquisition news and why investors are concerned;
- what we’re seeing from the stock;
- and what we’ll be watching for with regard to S stock ahead.
S Announces Agreement To Be Acquired By TMUS
As mentioned above, early this morning, news broke that T-Mobile and Sprint have entered into a definitive agreement under which TMUS will acquire S. The acquisition deal is valued at approximately $26 billion and represents a strong premium over the current price of Sprint shares. So, what’s the big deal? Why is S falling in the market, rather than making a run for the top?
Well, this isn’t the first time that T-Mobile has tried to acquire Sprint, nor is it the first time that the two have entered into an agreement surrounding such an acquisition. However, last time, things didn’t go too well. You see, in the United States, there are laws that stop companies from monopolizing industries. These laws are designed to protect consumers from unfair prices charged by a company that just so happens to be the only option in the industry.
Therefore, in order for a deal to actually go through between S and TMUS, they must first obtain regulatory approval. The last time the companies tried to do just that, they were shot down. About 4 years ago, T-Mobile made an attempt to purchase Sprint, and the transaction continued until regulatory authorities found anti-trust issues. In order for this deal to go through, the companies must appeal to the same regulatory body that declined the companies in the past. This is going to be no easy task. So, instead of being excited about a potential takeover in the works, investors are concerned that the takeover won’t actually take place, and rightfully so.
What We’re Seeing From The Stock
In general, when acquisition news is released, we can expect to see strong gains in the value of the stock that represents the company being acquired. However, that’s not the case this time around. With the concerns that the acquisition has little chance when it comes to making it to regulatory approval, investors are sending the stock tumbling in the market this morning. Of course, our partners at Trade Ideas were the first to alert us to the declines. At the moment (9:43), S is trading at $5.74 per share after a loss of $0.76 per share or 11.77% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on S. In particular, we’re interested in following the story surrounding the potential acquisition. While the companies involved have a battle with regulatory bodies ahead, if the transaction does take place this time around, it will be an instant value add for all involved. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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