NEW YORK (TheStreet) --AT&T (T) - Get Report announced on Saturday that it agreed to acquire media and entertainment company Time Warner (TWX) for $85 billion. Shares of both companies are down on Monday morning due to concerns that regulatory issues will prevent the deal from going through.
Bloomberg's Alex Sherman appeared on this morning's "Bloomberg Daybreak: Americas" to discuss why investors are taking a negative view on this deal.
"The market obviously sees some regulatory risk on this deal and I think with reason," Sherman said. "The best proxy is Comcast (CMCSA) buying NBC, a deal that went through and there were regulatory conditions on that. But you can't discount Comcast trying to buy Time Warner Cable and that deal not going through."
Many people believed the Comcast Time Warner deal would have gone through, the issue was Comcast having too much power over the Internet, but the rules were "stretched" when that deal didn't go through Sherman added.
"I think people are looking at this one too and they're thinking that regulators, particularly Hillary Clinton, may want to be even tougher on regulatory than Barack Obama," Sherman continued. "Donald Trump has already come out and said he's going to block the deal. I think investors are saying the rules could change again here and regulators could figure out a way to block this deal."
In order to get the deal to go through AT&T is going to have to rely heavily on the conditions put forward, as Comcast did with the NBC deal, but there could still be some issues. There are many in Washington that did not like that earlier deal, BloombergTV's David Westin noted.
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Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate AT&T INC as a Buy with a ratings score of B. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, good cash flow from operations, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
You can view the full analysis from the report here: T