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Technology Stocks : How high will Microsoft fly?
MSFT 485.49+1.8%Nov 26 3:59 PM EST
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To: Sir Francis Drake who wrote (22247)5/6/1999 9:31:00 AM
From: John F. Dowd  Read Replies (1) of 74651
 
SFD: Here are some details about the stock deal:

Microsoft said it would buy $5 billion in AT&T securities that will be convertible into 66.7 million shares of AT&T stock. It also purchased the right to acquire an additional 40 million shares in three years. If it exercises all its options and winds up with 106.7 million shares, it would own about 3.4 percent of AT&T.

Michael Armstrong, the chairman and chief executive of AT&T, said in the joint announcement that his company is gratified that Microsoft shares its strategy for using ''cable to bring a new generation of digital communications, information and entertainment services to millions of American families.''

66.7 mill shares at 5 bill. comes to about 74 and change per share or a hefty 36% premium. That would make one suspect that MSFT has purchasea piece of paper that has an offsetting coupon or that the future purchases are at a very advantageous strike price. I am sure they didn't negotiate a worse deal than they could have through buying calls on the open market. It will be interesting to see how this deal is structured.

Conspicuous in its absence is the mention of a strike price. I guess we will see the details on T's Edgar. We don't know if the convert. is a rights deal or a preferred with or without coupon. We don't know how much of the 5 bill. is attributable to the future calls.

JFD
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