Humpty Dumpty

Putting A T& T together again

What will the 930 million shares of American Telephone and Telegraph be worth after the Jan. 1 breakup of the company? That is no idle question for the 3.2 million stockholders who make AT&T the most widely held firm. Because of its steady and solid dividends ($5.40 per share during the past year), Ma Bell has long been called the perfect investment for widows and orphans. Last week AT&T closed at $66.75. But the future course of the company after its dismemberment looks murky, and many bewildered shareholders are wondering whether they should buy, sell or hold. Says Ernest Liu, senior analyst at Goldman, Sachs: "The confusion over AT&T stock within the investing community is worse than I've ever experienced."

The 75% of A T & T's stockholders who own between ten and 500 shares face the biggest dilemma. Under terms of the divestiture agreement, they will keep their shares of the parent company, and in addition be given one share in each of the seven regional operating companies for every ten shares of A T & T stock they have. Thus someone with 100 shares of AT&T, worth $6,675 last week, would acquire another ten shares each in new companies with such unfamiliar names as Pacific Telesis and Ameritech. Those with fewer than ten A T & T shares will be given cash instead of partial shares in the operating companies.

Owning a piece of so many phone firms could perplex the savviest investor. "A lot of people can't even pronounce the names of the new companies," observes Neal Swearingen, a vice president at E.F. Hutton. Shareholders will have eight annual reports to read and eight 1099 tax forms to file. Even worse, selling stock in the operating companies will be expensive because brokers charge a premium for transactions under 100 shares.

Now some of Wall Street's biggest firms are forming trust funds that will take over the management of an individual's AT&T shares. The trusts are nicknamed "Humpty-Dumpty funds" because they try to put AT&T stock back together again after the breakup. Under the plans, shareholders can exchange their AT&T stock for shares in one of the funds. By combining the shares of all eight companies into one security, the funds make it easier for stockholders to hedge their investment bets. In addition, the broker handles all the paperwork, so the stockholder gets only one dividend check a month instead of eight checks every three months. All this convenience comes at a price, however. Brokers are currently charging a fee of 1.5% for the service, and the rate will go up to 3% after Jan. 1.

Merrill Lynch's Equity Income Fund First Exchange Series, the first of the Humpty-Dumpty funds, has already attracted 6 million shares from 20,000 customers. Explains Merrill Lynch Vice President Norman Schvey: "The fund is a holding operation until the dust clears. What the investor gains is a chance to think."

AT&T shareholders who want to extend their investment reach beyond the basic telephone business have another option. Last week Prudential-Bache formed a new mutual fund that allows them to trade in their stock for shares in a new telecommunications fund. The fund plans to sell off 90% of the phone company shares and invest the proceeds in such businesses as satellite communications.

AT&T has its own program for those who want to change the makeup of their phone company holdings. Beginning next year it will permit investors to sell their shares in one or more of the seven operating companies and use the proceeds to buy shares in the others. Charge for the service: 25-c- per share. For the short term, many analysts are advising Ma Bell's widows and orphans to wait until next year to get a clearer view of the new companies and gain a better idea of where they want to invest their money. . This file is automatically generated by a robot program, so viewer discretion is required.