BT share price: worry as big investor goes through a credit crunch

BT Group (LON: BT.A) share price has come under fire in the past few months as investors focused on its biggest investor. The stock plunged to a low of 109.50p on Tuesday, the lowest level since January. It has crashed by over 27% from its highest level this year, meaning it has moved to a bear market.

BT Group has not been a good investment to most people. Investors who bought the stock in February 2022 have seen their equity plunge by over 38%. This situation happened as the company’s growth slowed and costs of operations jumped.

BT Group now has another external challenge as its biggest shareholder goes through his biggest financial challenge on record. Patrick Drahi started buying the stock in 2021 and then added to it in 2022. He is now the biggest shareholder in the British telecom giant.

Drahi is now fighting to save his empire as interest rates soars. Altice, the company he controls, owes over $21.3 billion, which are set to mature by 2027. He needs about 3.5 billion euros in the next 12 months. 

As a result, investors believe that Drahi will need to do some divestments to raise the cash. Some of the liquid stocks he can sell to raise these funds are BT Group, Hot in Israel, and SFR.

Exiting BT Group stock would have an impact on both Drahi and the company. For Drahi, he will need to take a haircut since the shares have deteriorated after peaking in 2022. At the same time, BT Group will see more sell orders as he exits or reduces his stake.

Most importantly, many investors who bought BT Group because of Drahi’s involvement will also rush to sell the stock. Worse, Drahi is facing other challenges as Altice is under a corruption investigation in Portugal, a situation that could lead to a big fine.

BT chart by TradingView

Despite all this, BT Group is still a good company with a strong market share in UK’s telecommunication industry. The company has millions of customers in voice and data through its Openreach product. 

The most recent results showed that BT Group’s revenue jumped to over 5.1 billion pounds in its Q1 up from 4.9 billion in the same quarter in 2022. This growth was driven by its consumer, business, and Openreach businesses and offset by its intra-group items.

The challenge for BT Group is that its growth will likely take a hit as the UK economic growth stalls. Its profitability metrics will also be impacted by the country’s inflation, which stands at over 6%.

BT’s technicals are also not supportive. The BT share price remains below all moving averages and recently crossed the important support at 111.35p, the lowest point in August, September, and October. This means that the shares could drop further ahead of its earnings, which will come out on November 2nd.

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