Verizon's Share Price Boomerang
The report, which claimed that a bid had not yet been made but was under consideration by the Vodafone board, sent Verizon's stock up by $5.24, more than 12.5 percent, to $47 in early pre-market trading on the New York Stock Exchange (NYSE) Monday morning. That added about $14 billion to Verizon's market capitalization.
However, the price quickly slid back as investors digested the details, and at 7:47 a.m. it stood at $44.40, up $2.64 or 6.3 percent.
And by the time Vodafone issued a statement saying it "wishes to make it clear that it has no plans to make such an offer," Verizon's pre-market share price stood at $42.19, just $0.43 cents, or 1 percent, higher than Friday's closing price of $41.76.
The report sent Vodafone's share price in the other direction. It initially dipped 3.5 pence, more than 2 percent, to 159.7 pence on the London Stock Exchange as investors balked at even the faintest prospect of such a mammoth takeover bid.
Following the carrier's official statement, though, Vodafone's share price recovered to 162.8 pence, down just one quarter of a percentage point.
The report on the FT's Alphaville blog cited unidentified financiers as saying Vodafone had been considering a full takeover of Verizon as a way to gain control of Verizon Wireless , in which it holds a 45 percent stake. The report added that Vodafone could then offload Verizon's fixed-line assets to private equity firms in a $90 billion deal.
Vodafone's stake in Verizon Wireless has been the cause of much speculation in the past year, with some investors keen to see the holding sold rather than built upon. (See Vodafone Board: Hold the Mayo, Vodafone Hangs On to Verizon Stake, and Verizon/Vodafone Deal Reported Near.)
Most recently there has been speculation that Vodafone might exercise a put option that could require Verizon to buy a $10 billion chunk of Verizon Wireless from Vodafone, a move that would raise Verizon's stake in its wireless business to 62 percent and reduce Vodafone's stake to 38 percent. (See Does Verizon Want Wireless Back?)
Vodafone has stated on a number of occasions that it wants at least a majority control over the assets in its portfolio, something it doesn't have with its 45 percent stake in Verizon Wireless. However, Vodafone's CEO Arun Sarin has also stated on a number of occasions that the Verizon Wireless holding is a valuable contributor to revenues and earnings and has risen in value over the past few years.
The mobile giant, which generates more than $60 billion in annual revenues and boasts around 200 million customers worldwide, has been revamping its portfolio in the past few years with a number of asset sales and acquisitions. (See Vodafone Reports Annual Results, Vodafone Wins Battle to Buy Essar, Vodafone Sells Swiss Stake, Vodafone Cashes In on Japan, and Vodafone Buys Telsim Assets.)
— Ray Le Maistre, International News Editor, Light Reading