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Raymond James said the adverse reaction of Lumen stock is due to the deal value being lower than the $6 billion to $9 billion stated by a Reuters report in December.
Rumors of AT&T, Inc.’s (T) interest in Lumen Technologies, Inc.’s (LUMN) consumer fiber operations sparked a sell-off in the latter’s shares in late-afternoon trading on Tuesday.
On the other hand, AT&T's stock rose 1.30%, with the upside partly due to the optimism in the broader market.
A Bloomberg report said Tuesday afternoon that AT&T has been in exclusive discussions to acquire Lumen’s consumer fiber operations in a deal valued at more than $5.5 billion.
The report also noted that Lumnen CFO Chris Stansbury said at a conference earlier this month that building fiber-to-home and wireless gave large providers lower churn and more pricing strength and that the company’s consumer fiber business has generated great interest.
The executive said any transaction will likely help the company lighten its debt load.
The consumer optics space has been going through consolidation. In September, AT&T’s peer Verizon Communications, Inc. (VZ) announced a $20 billion deal to buy fiber internet provider Frontier Communications Parent, Inc. (FYBR).
Canadian telecommunications company BCE, Inc. (BCE) has agreed to buy Ziply Fiber, a fiber Internet provider in the U.S. Pacific Northwest, for a total transaction value of C$7 billion ($4.91 billion).
Commenting on the rumored AT&T-Lumen transaction, Raymond James said the adverse reaction of Lumen stock is due to the deal value being lower than the $6 billion to $9 billion stated by a Reuters report in December, TheFly reported.
Analysts at the firm said they would view a price over a 10-time multiple for the asset as a “very good” price. They also foresee competing bids from Verizon, T-Mobile US, Inc. (TMUS), and BCE.
Raymond James has a ‘Neutral’ rating on Lumen stock.
On Stocktwits, sentiment toward Lumen stock turned to ‘ bullish’ from ‘bearish’ a day ago, and the message volume on the stream spiked to ‘extremely high’ levels.
Retailers on the platform think the rumored deal value is cheap.
Another user said that Lumen’s stock could bounce before the official announcement.
After ending Tuesday’s session down 9.47% at $4.40, Lumen traded down 0.23% at $4.39 in premarket trading. The stock is down over 17% so far this year. AT&T was up 0.11% at $27.34 in premarket.
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