What happened

Shares of telecom stock Lumen Technologies (LUMN -1.51%) plunged 26.9% in September, according to data from S&P Global Market Intelligence.

Lumen's stock had actually held up relatively well this year until late August, despite its high debt load and declining revenues. However, those concerns eventually came home to roost following Fed Chair Jay Powell's hawkish speech in Jackson Hole and a disappointing August inflation report. Lumen's longtime CEO, Jeff Storey, also announced his retirement in September, adding another element of uncertainty surrounding the company's turnaround plan.

So what

On Sept. 13, Lumen announced Storey's retirement. In his place, Lumen's board appointed former Microsoft (MSFT 1.22%) executive Kate Johnson as the new CEO.

In the press release announcing the transition, Johnson said she was proud and eager to get started: "Lumen has made significant progress strengthening its balance sheet, expanding its fiber footprint and enhancing its portfolio of digital capabilities. I'm looking forward to leading this great company through its next chapter and helping customers leverage the Lumen platform to power amazing digital world experience."

The market didn't seem to take the announcement well, as Storey had been well-regarded in the industry, and Lumen itself is currently in the middle of a business model transition. Faced with declines in legacy copper and landline phones, Lumen is investing heavily in its fiber footprint and other new communications products to drive growth. However, the declining businesses currently outweigh the growth businesses, leading to revenue declines.

Lumen is also in a sort of race against time, with $28 billion in debt -- around four times this year's forecast for earnings before interest, taxes, depreciation, and amortization (EBITDA). Though Lumen is highly profitable, revenue declines combined with a high debt load don't inspire much confidence in this skeptical market.

Furthermore, some analysts have hypothesized Lumen's new CEO may cut the generous dividend that currently yields a whopping 14.4% after the recent stock drop. Sometimes, when starting a new job, it's easier for a CEO to cut a dividend to get a clean slate. Given Lumen's debt load in the age of higher interest rates, that's not an unfounded concern.

Now what

On the bright side, Lumen just completed two previously announced asset sales that should help the balance sheet. On Oct. 3, it completed the sale of its ILEC (incumbent local exchange carrier) business across 20 states to private equity firm Apollo (APO -0.11%). The transaction will bring in $7.5 billion, including $6.1 billion in cash and the assumption of $1.4 billion of Lumen's high-yielding debt. The divestiture follows Lumen's sale of its Latin American business for $2.7 billion on Aug. 1.

So Lumen's balance sheet now looks a whole lot better, but it also has a smaller asset base. That could mean a dividend cut may be the best option, with the new management using those funds to invest in growth. If that happens, the stock could fall even further. But that could actually make it extraordinarily cheap and potentially attractive to value investors.

Given the recent asset sales, management will likely put forward a financial model of the remaining assets on Lumen's upcoming earnings release. For those who play turnarounds and special situations, Lumen is a name to follow this fall.