WASHINGTON — An investor in Globalstar is ready to put $150 million into the low-Earth-orbit satellite operator in belief the company’s stock should be trading at five times current prices.
Mudrick Capital Management, a New York-based investment firm that holds over 5 percent of Globalstar’s stock, told Globalstar April 11 that it views the company’s stock — trading for less than a dollar a share — as “deeply undervalued, and that the operator’s S-band spectrum alone will be a major asset in the coming world of super-fast fifth generation “5G” connectivity networks.
Globalstar executives warned investors in February that current revenues are insufficient to cover debt payments mostly related to building and launching the operator’s second-generation constellation, which concluded in 2013.
“We believe that Globalstar’s current stock price is not reflective of the value of the Company due to market concerns regarding the Company’s capital requirements for 2018 and a potentially dilutive equity offering in response,” Jason Mudrick, founder and chief investment officer of Mudrick Capital Management, wrote to Globalstar April 11. “As such, we are prepared to lend the Company $150 million in a non-convertible financing instrument to cure its capital needs through the end of 2019 and to thereby address investor concerns.”
Mudrick Capital seeks out investments in distressed credit, and manages approximately $1.8 billion. Globalstar’s stock closed April 11 at $0.81 a share — a nearly 14-percent jump — after Mudrick Capital notified the U.S. Securities and Exchange Commission it was converting its passive stake to an active stake. Globalstar’s stock has shed nearly 70 percent of its value since the same time last year.
As of Feb. 23, Globalstar said it owed $574.7 million in debt, the majority stemming from bank loans for its new constellation through the export-credit agency BPI France Assurance Export.
The Mudrick loan comes with stipulations. Mudrick wrote that it would prefer Globalstar not seek a capital raise “without first assessing the market’s interest in participating.”
“For example, we would not support any overtures by the Company to seek additional financing from Thermo in exchange for convertible instruments senior to equity, because such an approach effectively amounts to the Company accepting dilutive capital from an insider,” Mudrick wrote.
Thermo Capital owns more than half of Globalstar shares, and is run by Jay Monroe, who is also chairman and CEO of Globalstar.
“We urge the Board to form a committee of truly independent directors to consider any potential capital-raising activities or alternatives to enhance shareholder value. We would welcome the opportunity to engage in constructive dialogue with the Board or a special committee of the Board in this regard,” Mudrick wrote.
Monroe and Thermo have for years sought to generate revenue from the non-satellite use of a portion of Globalstar spectrum, but faced substantial pushback from opponents claiming such use would cause overwhelming interference with other radio signals.
Globalstar altered its plans in 2016, and gained permission from the U.S. Federal Communications Commission that year to repurpose some of its S-band satellite spectrum for terrestrial LTE connectivity. The company is seeking similar permissions around the world to “harmonize” the spectrum for the same use globally. Botswana, a landlocked African nation in which Globalstar has a subsidiary, is the first country to also authorize Globalstar’s LTE plan.
Monroe did not respond by press time to SpaceNews inquiries about the proposed Mudrick investment.