Advertisement
Canada markets closed

  • S&P/TSX

    21,807.37
    +98.93 (+0.46%)
     

  • S&P 500

    4,967.23
    -43.89 (-0.88%)
     

  • DOW

    37,986.40
    +211.02 (+0.56%)
     

  • CAD/USD

    0.7273
    +0.0010 (+0.14%)
     

  • CRUDE OIL

    83.34
    +0.61 (+0.74%)
     

  • Bitcoin CAD

    87,969.41
    +672.97 (+0.77%)
     

  • CMC Crypto 200

    1,375.85
    +63.23 (+4.82%)
     

  • GOLD FUTURES

    2,405.40
    +7.40 (+0.31%)
     

  • RUSSELL 2000

    1,947.66
    +4.70 (+0.24%)
     

  • 10-Yr Bond

    4.6150
    -0.0320 (-0.69%)
     

  • NASDAQ

    15,282.01
    -319.49 (-2.05%)
     

  • VOLATILITY

    18.71
    +0.71 (+3.94%)
     

  • FTSE

    7,895.85
    +18.80 (+0.24%)
     

  • NIKKEI 225

    37,068.35
    -1,011.35 (-2.66%)
     

  • CAD/EUR

    0.6822
    +0.0001 (+0.01%)
     
MARKETS LIVE BLOG:

S&P 500 SLIPS BELOW 5,000; NASDAQ SINKS ON TECH DRAG

Nvidia tumbles 10%, Amazon loses more than 2% while Apple ends 1% lower

Why Uniti Group's Stock Plunged in February

Anders Bylund, The Motley Fool
Updated

What happened

Shares of Uniti Group (NASDAQ: UNIT) fell 51.6% in February, according to data from S&P Global Market Intelligence. The plunge happened when regional telecom Windstream Holdings (NASDAQ: WIN), Uniti's largest customer and former parent company, filed for bankruptcy.

So what

Windstream's business has been unhealthy for years, which is why the company spun off Uniti as a separate company in the first place. So when a federal judge ruled that some of Windstream's debts were in default because of the Uniti split in 2015, it was simply a long-awaited final push over the edge. Windstream's stock closed 61% lower that day, dragging Uniti along for a 37% single-day plunge.

Young man doing a facepalm while looking at his phone.
Young man doing a facepalm while looking at his phone.

Image source: Getty Images.

Now what

Windstream accounts for more than half of Uniti's total revenue, so it's no surprise to see investors taking Windstream's failure seriously. From here, Uniti hopes to untangle itself from Windstream's burning wreckage and move on to a more stable future with a rebuilt client portfolio. The company's networking infrastructure should provide a platform for a serious rebound, but it won't be easy, and Windstream's financial troubles might change Uniti's balance sheet as well.

ADVERTISEMENT

There's just no telling at this point. Personally, I'm holding on to my Uniti shares for dear life through this long-expected storm at a 35% loss over a four-year holding period. A return to full health will take years, and Uniti may be headed in the other direction if Windstream's fallout becomes too much to handle.

Let's just say, I'm not backing up the truck to buy more Uniti shares at these lower prices. That 29% dividend yield is nothing but a big, red flag. I'm already putting enough of my capital at risk here.

More From The Motley Fool

Anders Bylund owns shares of Uniti Group. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.