Sprint Falls 8% After Analyst Warns of ‘Financial Distress’

Shares of Sprint Corp. suffered their biggest one-day drop since November after an analyst said the company could soon be in “severe financial distress.”

MoffettNathanson LLC’s Craig Moffett, appearing on CNBC this morning, said that a potential merger between Sprint and T-Mobile US Inc. that was “unthinkable” to regulators a year ago could gain sympathy if the company runs into financial trouble.

“If Sprint really is in severe financial distress, as we think they will be within a relatively short period of time, then it’s possible that the government would look at that deal differently. But no guarantees,” Moffett said. The merger also could face an easier review under a new presidential administration in 2017, he said.

Sprint Chief Executive Officer Marcelo Claure is struggling to reverse seven years of subscriber losses and has had two consecutive quarters of gains, mostly from tablet subscribers and pay-as-you-go customers.

Sprint spokesman Scott Sloat declined to comment on what he called speculation about the company’s finances.

“What is fact is that over the past two quarters Sprint has added more than 2 million customers, customer churn has dropped significantly and numerous third parties have cited our network improvements, all of which position Sprint for future growth,” Sloat said.

Moffett’s comments on CNBC stem from a research note he wrote in May that said Sprint had spent $914 million of its cash supply in the fiscal fourth quarter.

“Sprint is to be lauded for the improvement in subscriber trends, but we fear it may come to naught,” Moffett wrote in that note. “At the current rate of cash burn, the company will run out of cash in a year.”

Moffett recommends selling the stock.

Claure said in May that he’s confident in the company’s finances and that there is $7 billion in available funding.

Sprint fell 8.1 percent to $3.95 at the close in New York. Its lowest previous close was $3.81 on Dec. 16.

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