AT&T shares drop 7% as CEO starts to favor spinoff for Warner-Discovery deal
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AT&T (T
-3%) shares gave up more than 7%, Wednesday, as Chief Executive John Stankey brought up a topic front and center in investors' minds: how the company will structure its blockbuster deal to combine WarnerMedia with Discovery (NASDAQ:DISCA).

The concerns surround whether AT&T (NYSE:T) would execute a spinoff as opposed to a split-off. The difference being giving a percentage share of the upcoming Warner Bros. Discovery to each of its shareholders, or to do an exchange offer that would end up retiring a substantial amount of AT&T shares. A split-off is a relatively rare option, exchanging shares in a subsidiary for shares in the parent company.
For Stankey, it looks to be landing in favor of a spin. In an interview with CNBC's David Faber, Stankey said AT&T (T) is keeping its options open as the company wanted to assess the state of the market as the transaction got closer.
AT&T has given serious consideration to a split-off as "we'd like to possibly, over time, reduce the AT&T share count and this may be one way to do that," according to Stankey.
"It is a very, very large split. It's unparalleled in terms of anything that's ever been done in history," Stankey said. "And you know, that certainly gives me some pause."
The company also has a very large retail base in the stock that "isn't quite as deep" in some issues as the institutional base, Stankey said.
AT&T (T) has a focus on shareholder value and a split-off of such size would require some value "leakage," Stankey said, that would come via the heavy discount required to move that quantity of shares.
"I'm also pretty interested in moving through this as quickly as we can. There's some advantages to doing a spin in terms of how mechanically it can be done and how much quicker it can be done," Stankey added.
Share retirement in the spin vs, split-off question is also central to the dividend, always a key factor in AT&T (T) investment. Stankey reiterated what AT&T (T) said at the time the deal was announced: It expects a payout level of $8 billion-$9 billion, and "anywhere in that range, even if it's at the low end of that range ... the yield on AT&T's dividend and the restructuring of the business will be in the 95-percentile range of yields of dividend-paying stocks in corporate America."
AT&T (T) shares saw higher-than-usual volume, with more than 81 million shares exchanged. Prior the market open, AT&T (T) reported better-than-expected quarterly results led by gains in its wireless business and HBO subscribers.