Initiating Coverage on AMT – Strong Sell (Slide Deck)

July 17, 2013

Muddy Waters rates American Tower Corporation (NYSE: AMT) shares a Strong Sell. In this latest report Muddy Waters highlights how:

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We rate American Tower Corp. (NYSE: AMT) a Strong Sell and value it at $44.57 per share, representing downside of 40%. AMT has serious challenges domestically and internationally that have not been factored into the stock price. It has engaged in a value destroying investment binge overseas, and we have identified a significant material misstatement in the Company’s accounts that could amount to fraud.

There is an approximately US$250 million discrepancy between what AMT claims to have paid for the acquisition of towers in Brazil, and the actual selling price. AMT claimed to have paid US$585.4 million for the towers, but the real price was close to US$300 million. If AMT is aware of this discrepancy, it would amount to fraud. We have provided our research to the SEC.

CEO James Taiclet’s consistent sales of approximately 90% of the shares he receives from option exercises suggests a lack of faith in the sustainability of AMT’s business – ironically, this is a view we share with him.

AMT’s international business is in part a de facto lending business that artificially inflates revenue, EBITDA, and AFFO. It is also part carry trade and part levered directional currency bet. This bet has resoundingly gone south this year.

AMT’s international IRRs are generally poor and far below cost of capital.

While wireless data usage will grow, much of this growth will circumvent cellular towers. Wi-Fi and more recently introduced technologies are making towers the data delivery option of last resort.

AMT’s REIT-focused investors will be disappointed by their inability to access AMT’s overseas cash flows.

Wall Street is setting investors up for a fall in AMT. We have reviewed five analyst models, and it is clear that they do not understand the company or know how to model it.

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