Sprint and T Mobile’s Extreme Debt Post-Merger

During the financial crisis, the price of Sprint stock fell from $24 per share to $1.30, effectively pricing into the stock the looming possibility of bankruptcy. At the time, Sprint had a debt burden of $20 billion and was losing $1.6 billion during calendar year 2008.

I never write about Sprint as an investment because the debt burden has been just too speculative—if I can’t be reasonably sure that the debt won’t force the company into bankruptcy within the next decade or so, why cover the business enterprise?

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The Reverse Stock Split’s Impact on Shareholders

Companies that engage in reverse stock splits have a terrible track record of underperformance against the stock market as a whole. Theoretically, changes in the arrangements of a corporations’ share count should have no effect on the underlying business, yet research shows that these types of splits are associated with underperformance.

A reverse split occurs when a company recalls your shares and issues you a fewer number of shares that trade at a higher price. In other words, the whole point of a reverse share split is that the company is saying that it’s better for you to have one hundred dollar bill rather than five twenty-dollar bills.

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