Not too long ago (in a galaxy far, far away), the stock market was flying high and activist investor Elliott Management was strong-arming AT&T to buy back millions of its own shares of stock. In this way, the total number of AT&T shares would decrease, raising the price so that investors like Elliott could make a killing.
On March 3, AT&T announced it would be repurchasing $4 billion worth of its shares during the second quarter, and it had plans for more buybacks throughout 2020. But today, AT&T filed an SEC statement saying it is canceling its accelerated share repurchase agreement with Morgan Stanley to repurchase the $4 billion worth of shares during Q2.
The company attributes the move to the coronavirus pandemic.
“While our business continues to operate effectively during the COVID-19 global pandemic, we have decided at this time to cancel this ASR agreement and any other repurchases to maintain flexibility and focus on continued investment in serving our customers, taking care of our employees and enhancing our network, including nationwide 5G,” wrote AT&T in its SEC filing.
AT&T says with the volatility in world economic markets, “We are not able at this time to estimate the impact on our financial or operational results. Among the factors that could impact our results are: effectiveness of COVID-19 mitigation measures, global economic conditions, consumer spending, work from home trends, supply chain sustainability and other factors.”
The Dow Jones Industrial Average has dropped from its high of around 29,500 in mid-February to around 20,300 today. AT&T’s stock was trading at about $38 in mid-February. But today, it is trading at around $29.80.
Communications Workers of America
At a Morgan Stanley investor conference in early March, AT&T COO John Stankey said that the management team, and under Bill Morrow’s leadership, was working on 10 broad cost-cutting initiatives that would generate “double digits of billions” over three years. Stankey said short-term opportunities in 2020 include “headcount rationalization” and “benefit restructuring” that is already happening.
The Communications Workers of America (CWA) has slammed AT&T for cutting jobs at the same time that it was planning stock buybacks.
CWA has called Elliott a “vulture capitalist.” And it’s called AT&T on the carpet for promising to create jobs a few years ago when it was lobbying the Trump Administration to give tax breaks for bringing back capital from oversees.
In recent contract negotiations, CWA District 9 Vice President Frank Arce said in a statement, “AT&T’s announcement of more stock buybacks is an affront to the thousands of workers going through contract negotiations because it shows the company’s primary concern is pandering to wealthy hedge fund managers.”
Others have criticized AT&T for planning stock buybacks instead of increasing capital expenditures to build out a 5G network.
In 2019, AT&T’s gross capital investment was $23.7 billion. But for 2020, AT&T is projecting capex in the $20 billion range.