Key points:
- The Altice stake in BT is called in for consideration
- This near eliminates the possibility of an immediate Altice Bid for BT
- It also makes any other bid more unlikely
BT Group (LON: BT.A) shares are down 5% this morning on the back of the announcement of a National Security investigation. This isn't quite as bad as it sounds, it doesn't mean they're sending the spies in to check the company out. Rather, BT is considered to be one of the big and important companies in the country, so if a foreigner tries to buy into it substantially then there could be an investigation.
This is what is happening to BT shares here. The national security work isn't into BT at all, but the implications of Altice now owning 18% of BT.
One thing this shows is the difficulty of investing in companies – like BT – which are subject to that national security clause. The Altice BT stake reached 18% of BT back in December, as we reported. It's now only in May, 6 months later, that the issue is called in for consideration? 6 months is something of a lifetime in the stock markets (the old joke is that short term is now, long term is after lunch) and such delays on what people may or may not do doesn't aid in the efficient operation of the market.
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We can think of that as being an economic critique if we like. But it does mean that when we trade in national champions like BT shares we've always got to be looking over our shoulders at the politicians. They've taken to themselves the powers to intervene, when actually will they? And, if they do what are they going to do? These national security issues therefore dog our investment strategies.
The other issue here is that Patrick Drahi, the boss behind Altice, said back on 15th Dec when he upped his BT shares stake to 18% that he was not intending to make a bid for the company. The way stock market rules work is that he is then held to that – an official announcement like that – for 6 months. That 6 months of course runs out in a couple of weeks, 14 June. So, we would be expecting some speculation as to whether he was likely to change his mind or not. Calling in the Altice stake in BT now means that he can't change his mind – it blocks off any possible bid for BT from that source.
This is really what has knocked 5% of the BT share price this morning. The price was bid up, a bit, given that there's that strategic investor, Altice, with a large stake. Whose standstill agreement is just about to come to an end and who might, therefore, up the stake again or even bid for all of BT. The national security investigation knocks that possibility on the head.
In fact, it gets worse than that for those who might have been expecting a bid – or even speculating upon one. Given that the one major shareholding is now called in for examination that means that any other possible bids are also likely to be so called in. That reduces, substantially, the possibility of a bid for all of BT.
The implication of this National Security and Investment Act for BT shares is that they're worth less. Simply because it's now more obvious that foreigners trying to buy BT will find it very difficult to do so.