Deal Chatter Moving Stock That's a Cramer Fav
Deal chatter is swirling around two of Cramer's favorite stocks. What does the Mad Money host make of it all?
"Is Sprint-Nextel for sale?" That is the question.
And if so, will Softbank, the giant Japanese firm, swoop down and buy a big percentage of it? Will shareholders approve the transaction?" And will Clearwire be a part of the transaction?
Lots of questions – especially since shares of Sprint bounced more than 10% on the speculation.
"Candidly, nobody seems to know what's really happening, although my colleague David Faber laid out the template better than anyone, with the prospects that Softbank takes a stake in Sprint to get access to Sprint's spectrum, and Sprint then buys Clearwire to acquire that hurting company's spectrum, " explained Cramer.
Cramer added that both Sprint and Clearwire have a huge amount of debt, and he believes it will be the bond market that will control these deals, not the stock market.
"I, personally, have felt that CEO Dan Hesse's done such a good job with the turnaround, " he said.
Cramer goes on to say that a $12 billion investment by Softbank would allow Sprint to borrow at very low rates, thereby resolving once and for all the larger solvency issues that have repeatedly swirled around the company. He thinks a well-capitalized Sprint could give Verizon and AT&T a run for their money."
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"That, to me, makes it a keeper, despite this run, which, by the way, didn't take it much further than the stock had moved beforehand."
Clearwire, on the other hand says Cramer, is the proverbial horse of a different color.
"While the company has some valuable assets, it owes so much money, billions and billions of dollars worth of debt, that I think Sprint would be foolish to buy 51% of Clearwire's stock, which is the portion of the company it doesn't own already."
He goes on to say, "That makes me want to be a seller of Clearwire after this run, because I never recommend stocks totally on a takeover basis when the fundamentals are clearly faltering."
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