AT&T Buying Straight Path Communications in a Stunning Deal

Normally, a $1.6-billion telecom deal isn’t something that’s going to make major headlines. But there’s much more to AT&T Inc.’s (NYSE:T) deal to buy Straight Path Communications Inc. (NYSE:STRP).

The first thing of note is the price paid. Straight Path shares closed on Friday at $36.48 each, for a market cap of just under $430 million.

The all-stock deal valued Straight Path shares at $96.63 each for a deal premium of a whopping 162%.

The deal is expected to close sometime in the next 12 months.

On January 11, Straight Path announced it was seeking strategic alternatives, which is usually code for the company putting itself up for sale. Shares have tripled since the company made that announcement.

Straight Path is the owner of a significant portfolio of millimeter wave spectrum, which AT&T thinks will be valuable once 5G wireless speeds become commonplace. The deal "will support AT&T’s leadership in 5G," the company said in a statement.

Straight Path was also a favorite target of short-sellers, who thought the sale process was a farce orchestrated to distract investors from a recently-settled federal probe that claimed Straight Path had submitted false data to the FCC.

According to NYSE short reports, approximately 3.5 million – out of 11.7 million – Straight Path shares were sold short. Kerrisdale Capital, a prominent short-selling hedge fund, claimed the company didn’t have enough capital to pay the $15-million fine and stay solvent for all of 2017. In addition, Kerrisdale valued the company at about $200 million, less than half of the company’s value before the acquisition.