AT&T cans consumer group spinoff, proposes reverse stock split

Trying to prop up its ailing stock price, AT&T said Thursday it is postponing its planned spinoff of its consumer long-distance unit and applying with the SEC for a one-for-five reverse stock split.

In documents filed with the SEC Wednesday and Thursday, AT&T requested permission to bring the stock split for a vote and stated its intention to delay issuing a tracking stock for AT&T Consumer. While not uncommon for smaller companies, few large entities have tried reverse stock splits, which would essentially compound the value of every five shares to one share, leaving the company with the same overall market capitalization. The advantage to AT&T would be to quintuple its share prices, which this week hovered around $15 a share. The value of the stock is expected to drop further once AT&T concludes its sale of AT&T Broadband to Comcast.

Using a reverse stock split is considered a last-ditch effort to raise share value and is often used by smaller companies trying to escape the minimum share value requirements of the major stock exchanges.

While market watchers may scratch their head at AT&T’s share manipulation, company officials said the postponed tracking stock shouldn’t come as a surprise.

“When we originally announced our plans to issue the tracking stock, we said it would depend on market conditions,” an AT&T spokeswoman said. “We’re in the middle of a bad market. You don’t want to issue a new security in a bad market.”

She added that AT&T has tentatively rescheduled the tracking stock issue for a year after shareholders vote on the reverse stock split. After SEC approval, the soonest AT&T can assemble shareholders is this summer.