April 28, 2000
AT&T Wireless Unit Offering Brings
Company $10 Billion
By SETH SCHIESEL
hey did not triple, double or even jump 50 percent. But for
AT&T, yesterday's 8 percent rise for the new shares that are
meant to track the company's wireless unit was victory enough.
In the nation's biggest initial stock offering yet, AT&T agreed
Wednesday night to sell 360 million of the new wireless shares for
$29.50 each, just above the middle of the company's estimated range.
That brought in $10.6 billion (before paying more than $300 million to
investment banks for underwriting the deal).
The wireless shares opened for trading yesterday at $30.125 before
rising to close at $31.6875 in torrential trading of 124.7 million shares on
the New York Stock Exchange. That made for the second-busiest
trading day yet for an individual Big Board stock.
Until recently, some high-technology stocks could routinely be expected
to double in their first day of trading. By that perhaps-unrealistic
standard, AT&T's deal was disappointing.
But because its offering was so huge and because the equity markets are
so unsettled now, AT&T could not realistically have hoped for the shares
to experience any sort of explosive first-day gain. Even though the shares
did not rise to the $32 figure that had been the top of AT&T's estimated
range, the company's executives could still count the more than $10
billion they had raised and point with pride to the wireless unit's new
market value of more than $73 billion.
"It's a big vote of confidence in AT&T Wireless," John D. Zeglis, the
wireless unit's chief executive, said in an interview. "This is a vote that
wireless is the future and some encouragement that we can take this to
new places like mobile Internet and fixed broadband communications to
the home."
That said, Mr. Zeglis acknowledged that the market turmoil of recent
weeks did not help the offering.
"We wouldn't have chosen this market to play into if we had our choice,"
he said.
Referring to trips that he and his team made in recent weeks to present
the offering to big institutional investors, he added: "Of course we had our
eye on the market the whole time, not that we could do anything about it.
We were very aware of what was going on around us and what the
comparable companies were trading at."
After selling the deal, AT&T retained about 84.4 percent of the new
wireless tracking shares, theoretically worth about $62 billion.
As is customary when an older, slower-growing company offers shares in
a smaller, faster-growing subsidiary, AT&T is not receiving full financial
credit for that stake. AT&T's shares fell $2.875 yesterday, to $47.875,
shaving about $10 billion in market value from the parent company and
leaving it with a market value of about $153.3 billion.
Subtracting the value of AT&T's stake in the wireless unit would imply
that the rest of AT&T, including its big long-distance telephone
operation, is worth only about $91 billion. But it is surely worth more
than that. After all, AT&T enjoyed a market value in the $150 billion
range last fall, before it became known that AT&T was planning to issue
the new wireless shares.
AT&T intends to distribute most (and will probably end up distributing
all) of its remaining wireless shares to the holders of the company's
common stock. But the value of that distribution has been obscured, at
least partly because the holders of those common shares really have no
way to know just what they will end up getting.
That is because AT&T will probably give the owners of its common
stock the option to exchange that stock for wireless shares outright
before distributing the remaining wireless shares to the remaining owners
of AT&T common stock.
AT&T's board has not made any final decisions on such a plan, but such
exchange offers are far from obscure to AT&T's top leaders. John C.
Malone, who sits on AT&T's board, has employed exchange offers at his
Liberty Media operation. Moreover, Charles H. Noski, AT&T's chief
financial officer, held that job at the Hughes Electronics unit of General
Motors last year when G.M. began considering a similar sort of exchange
deal.
Last week, G.M. announced the final details of its Hughes-G.M. share
exchange.
nytimes.com |
