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.
The 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.
