- U.S. District Court Judge Richard Leon did not impose conditions on the merger’s approval.
- He also urged the government not to seek a stay when issuing his decision in a closed-door room with reporters.
- Shares of Time Warner jumped roughly 5 percent in extended trading. Shares of AT&T dropped as much as 2 percent.
A federal judge said Tuesday that AT&T‘s $85.4 billion purchase of Time Warner is legal, clearing the path for a deal that gives the pay-TV provider ownership of cable channels such as HBO and CNN as well as film studio Warner Bros.
U.S. District Court Judge Richard Leon did not impose conditions on the merger’s approval. He also urged the government not to seek a stay when issuing his decision in a closed-door room with reporters.
AT&T General Counsel David McAtee said the company was pleased with the result.
“We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the government’s lawsuit to block our merger with Time Warner,” McAtee said in a statement. “We look forward to closing the merger on or before June 20 so we can begin to give consumers video entertainment that is more affordable, mobile, and innovative.”
Shares of Time Warner jumped roughly 5 percent in extended trading. Shares of AT&T dropped as much as 2 percent.
Bursting of the bubble
Around the turn of the millennium, spending on technology was volatile as companies prepared for the Year 2000 problem, which, when the clocks changed to the year 2000, actually had minimal impact.
In February 2000, with the Year 2000 problem no longer a worry, Alan Greenspan announced plans to aggressively raise interest rates, which led to significant stock market volatility as analysts disagreed as to whether or not technology companies would be affected by higher borrowing costs.
On March 10, 2000, the NASDAQ Composite stock market index peaked at 5,048.62.
On March 15, 2000, Yahoo! and eBay ended merger talks and the Nasdaq fell 2.6% but the S&P 500 Index rose 2.4% as investors shifted from strong performing technology stocks to poor performing established stocks.
On March 20, 2000, Barron’s featured a cover article titled “Burning Up; Warning: Internet companies are running out of cash — fast”, which predicted the imminent bankruptcy of many internet companies. This led many people to rethink their investments. That same day, Microstrategy announced a revenue restatement due to aggressive accounting practices. Its stock price, which had risen from $7 per share to as high as $333 per share in a year, fell $120 per share, or 62%, in a day. The next day, the Federal Reserve raised interest rates, leading to an inverted yield curve, although stocks rallied temporarily.
On April 3, 2000, judge Thomas Penfield Jackson issued his conclusions of law in the case of United States v. Microsoft Corp. (2001) and ruled that Microsoft was guilty of monopolization and tying in violation of the Sherman Antitrust Act. This led to a one-day 15% decline in the value of shares in Microsoft and a 350-point, or 8%, drop in the value of the Nasdaq. Many people saw the legal actions as bad for technology in general. That same day, Bloomberg published a widely-read article that stated: “It’s time, at last, to pay attention to the numbers”.
On Friday, April 14, 2000, the Nasdaq Composite index fell 9%, ending a week in which it fell 25%. Investors were forced to sell stocks ahead of Tax Day, the due date to pay taxes on gains realized in the previous year.
By June 2000, dot-com companies were forced to rethink their advertising campaigns.
On November 7, 2000, Pets.com, a much hyped company that had backing from Amazon.com, went out of business only 9 months after completing its IPO. At that time, most internet stocks had declined in value by 75% from their highs, wiping out $1.755 trillion in value.
Several accounting scandals and the resulting bankruptcies, including the Enron scandal in October 2001, the Worldcom scandal in June 2002, and the Adelphia Communications Corporation scandal in July 2002 further eroded investor confidence.
By the end of the stock market downturn of 2002, stocks had lost $5 trillion in market capitalization since the peak. At its trough on October 9, 2002, the NASDAQ-100 had dropped to 1,114, down 78% from its peak.