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Telstra made a few announcements this week – well why wouldn’t they. They need to halt the sliding share price. I don’t read newspapers these days – but I did see the headlines that they were cutting 6000 jobs, holding dividend, ramping up deal competiveness to claw back market share.
I did recall my days as a CEO and/or Chairman and the times we were facing a not so attractive profit announcement and one naturally looked for some good news to soften the blow, maybe even looked at provisions to see if they could be loosened; looked for new initiatives that might boost the bottom line next year; even just find some positive spin. In time I learnt the hard way - it is better to tell it as it is and cop it on the chin.
But Telstra has seen a long slide in their share prices - and whilst the Board and CEO might say they don’t focus on the share price it is hard to ignore – they are but human. And we all have a master whether that be the Board, shareholders and maybe big ones in the form on Instos.
Instos may buy the recent spin – but I don’t. What Instos might do in the future - well only time will tell on that. But making dividend payment out of reserves, whilst it is all kosher they are actually paying dividend from money they did not make. Now that will maybe stop dividend investors from bailing – as anyway most of them have experienced the long slide over the last 11 years and it is just too late to bail – maybe?
It is one thing to stop current investors from bailing but it is another matter to excite new money into the stock. And I am not convinced it can do the latter – or the former.
With the stock at $2.60ish and a possible low around $2 recent announcements may not even be enough to keep current investors happy. And even if new money comes in it may be just play money to ride the dead cat bounce before we see the next slide.
This week we show the Monthly picture. It is long dated and thus will take some time to unfurl:
click to enlarge
But it is classic Elliott!
Enjoy the ride
Tom Scollon
Chief Analyst
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