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Straight Path Communications Inc (STRP) Pops 150% on ATandT Inc. (T) Buy

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Straight Path Communications Inc (NYSEMKT:STRP) - a small-cap company that collects assets including licenses for 5G spectrum, as well as intellectual property - is flying high on a buyout from AT&T Inc. (NYSE:T). The telecom giant announced on Monday that it would buy out Straight Path for $1.25 billion in stock, sending STRP stock up roughly 150% in morning trade.

Straight Path Communications Inc (STRP) Pops 150% on AT&T Inc. (T) BuyThe deal values Straight Path at $95.63 per share, which means at current prices of nearly $90 per share, shares haven't yet fully baked in the acquisition price.

The acquisition isn't a total surprise - Straight Path, which was spun off of IDT Corporation (NYSE:IDT) in 2013, said back in January that it had hired Evercore Partners to explore "strategic alternatives to maximize shareholder value." That announcement came a week after STRP agreed to pay $15 million and surrender certain licenses as part of a settlement with the FCC over filing misleading information while trying to earn license renewals.

AT&T's deal is actually worth $1.6 billion, as it includes the FCC settlement amount, among other items.

However, excitement over a potential sellout was muted after the Kerrisdale Capital hedge fund released a report saying that Straight Path's spectrum "is worth far less than the company's current half-billion-dollar market cap."

That report, released in mid-January, sent STRP stock down by double digits in a single day before settling 6% lower.

For AT&T's part, the deal helps to bring in valuable spectrum that the company will need to build out a 5G network. However, shares are mostly unchanged on news of the deal.

As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.


This article was written by Robert Martin for InvestorPlace on Apr 10, 2017.

This article published in collaboration with Scutify, the best app for traders and investors. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.

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