Haters gonna hate... Only some release a 23-page open letter about it. Hedge fund Elliott Management just sent one to AT&T after splurging $3.2B for a 1.2% stake in the telecom giant. The letter's core theme: Change (almost) everything. Here's how to interpret the Real Housewives-style takedown:
- It's not personal, AT&T: Elliott has "tremendous respect for the Company’s legacy."
- But there's a problem: Over the last 10 years, the broader market (the S&P 500) has risen 193% — but AT&T only rose 42%.
- So it's time for a makeover: Specifically, cut the CEO and the board – Elliot thinks that “this is the moment to determine the right team for the next decade.”
- Take the free advice and everyone wins: The fund thinks its proposals could push up AT&T stock by 65% in 2 years.
- FYI, the fund doesn't own enough stock to force AT&T management to listen — but shares jumped because investors hope it does.
Here's the problem... There are a lot of problems facing AT&T. The hedge fund spent pages 2-23 covering them.
- The botched iPhone: AT&T enjoyed exclusive rights to sell iPhones when they launched — but its poor service quality ended that.
- The identity crisis: Verizon snagged the high-end wireless market while T-Mobile/Sprint grabbed the low-end — AT&T was awkwardly left in the middle.
- The brutal acquisitions: AT&T has dropped a hefty $200B on them the last few years — it bought DirecTV at its peak, and satellite TV has only lost subscribers since.
AT&T is a tech company led by landline guys... That's the biggest issue. The current CEO has run things for 12 years, and the newly-promoted COO's telecom roots go back to 1998. But now AT&T is a tech media company that owns streaming tech and HBO — that means it competes directly with Netflix. Elliott wants leadership to be more iPhone, less landline.