Every year, a once-proclaimed genius winds up wearing a dunce cap.
In 2017 it was Jeff Immelt of General Electric (NYSE:GE). His resignation revealed a host of mistakes that took GE out of the Dow 30 after 130 years.
In 2018 it was Brian Krzanich of Intel (NASDAQ:INTC) bounced after an affair, but then also revealed to have been a great destroyer of shareholder value.
In 2019 the award must go to Masayoshi Son, CEO of Softbank Group (OTCMKTS:SFTBY) and head of the $100 billion Vision Fund, investor in Slack (NASDAQ:WORK), Uber Technologies (NASDAQ:UBER), WeWork and Wag.
Before launching the Vision Fund, Son had controlling interest in Sprint (NYSE:S) since 2013, promising to make it a true competitor to AT&T (NYSE:T) and Verizon Communications (NYSE:VZ), the first global wireless carrier.
How’d that work out?
Sprint Hollowed Out
Back in April of 2018, Son announced he would merge Sprint into T-Mobile (NASDAQ:TMUS), and take a minority stake in the resulting company.
The merger was valued at $59 billion, including Sprint’s $37.5 billion of debt. The deal was that for every 9.75 shares of Sprint stock, investors would get one share of T-Mobile. The ratio would fix Sprint’s stock price as a percentage of T-Mobile’s.
If you bought TMUS stock when the deal was announced, you’re up 34%. Based on the ratio you should be up an equal amount in S stock. But you’re not. You’re up 4.65%, and that may be going down.
Once it’s announced a company will be bought, executives polish their resumes and ambitious employees plot their next move. A company being acquired is like cheese left on a counter. The smell ripens, but eventually it goes bad. That’s why you fix the terms before you get approvals.
Sprint is rotting on the counter. Revenue has been declining, losses have been piling up. Marcelo Claure, Sprint CEO at the time of the merger, has become Softbank CEO, and has bought into a soccer team, Inter Miami. He has an amazing life.
This life does not include hanging around Overland Park, Kansas, where Sprint is based. Claure’s new job at Sprint is to get the merger done. It’s mostly done. But it’s not entirely done. Despite winning U.S. government approval, and getting many states to drop their own opposition, there are still a dozen objecting, and a trial is underway.
Sprint Falling
During the summer, after the Department of Justice decided to agree to the merger, subject to divesting assets to DISH Network (NASDAQ:DISH), Sprint shares rose to a high of $8.06.
As trade opens this morning, they are at $5.34. That’s a loss of one-third their value. That’s not supposed to happen. Now T-Mobile wants to cut the ratio, justifying the fall in the stock price and cutting the Sprint stock owners’ payout.
The partners blame “Sprint’s financial woes” for this. Of course, there are financial woes. The CEO is AWOL. In the last two fiscal quarters, Sprint has lost $385 million. The company has been hemorrhaging customers, claiming it will cut $2 billion in costs this fiscal year, an announcement certain to keep morale falling.
Bottom Line on TMUS and S Stock
In A Walk on the Wild Side Nelson Algren wrote, “Never play cards with a man called Doc. Never eat at a place called Mom’s. Never sleep with a woman whose troubles are worse than your own.”
Here’s a new rule. Don’t place money with Masayoshi Son.
Son-san is so busy looking over the horizon that he can’t see what’s in front of him. T-Mobile hosed him on the Sprint deal, and his inattention has since cost billions of dollars. The deal now must happen to save Sprint from collapse. It’s WeSprint.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time,available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.
