WSJ 5/16/00 letters re: Globalstar Massacre
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May 16, 2000
Manipulating Globalstar?
It seems obvious from your article ("Message Board Blatantly Urges Investors
to Manipulate a Stock") that you have not read much of Maurice Winn's
writings. In the three years or so that I've known Mr. Winn via Silicon
Investor, I have always counted him among the few must-reads on whatever
topic he has chosen to write. He is always interesting, which even the few
posts on the Great Globalstar Memorial Day Massacre should prove.
I am not qualified to comment on the legality of his proposing the Great
Globalstar Memorial Day Massacre, although I cannot see how it could be
illegal to suggest people move their stock from a margin account to a cash
account, but I believe I do understand the frustration that brought forth this
idea. I know that Mr. Winn is one of "true believers" in what Globalstar is
attempting to accomplish, even if he and I and many of our friends are less
than satisfied with much of what the company has done -- or not done -- and
even more dissatisfied in how Globalstar has been jerked around by people with
private agendas. Hard to believe, but some of this has been seen in your fine
publication.
This has been possible, because unfortunately, while Globalstar has been
focusing on the "hard" stuff of getting the satellites up and the gateways built,
they have allowed their service providers, who are all limited partners in
Globalstar and are the ones actually responsible for selling Globalstar services,
to neglect the "easy" stuff like public relations, sales, and marketing.
Additionally, nobody, including Globalstar, has been successful in getting the
message out that Glolbalstar is not Iridium. (ICO either, for that matter.)
Globalstar's business plan is based on entirely different assumptions and goals.
Unlike Iridium which was designed to bypass the existing infrastructure,
Globalstar enhances the functionality of the existing cellular networks.
Globalstar fills in the Swiss-cheese cellular holes in the developed countries (I
lose service between my house in Montgomery County and my office twenty
miles away in Chester County) and brings reasonably affordable service to
parts of the world where wired and conventional wireless telephone service has
never existed. And probably never will.
Some of that is around here, but more of it is over there. Places like Australia,
South America, Africa, India, and China, to mention a few, have huge areas
that have significant populations but will never be able to afford wired
infrastructure for any but a few in the large cities. Cellular networks are
economically viable in more areas, because their infrastructure costs are lower,
but as population density drops even those systems do not make sense.
Think too of this: Globalstar has built a world-wide telephone network for less
than several telecom companies each paid are paying for additional telecom
spectrum for England. Unlike Motorola's failed Iridium project, the Globalstar
technology (supplied by Qualcomm) actually works really well.
Mr. Winn knows this, because he has used both. The gateways are coming
online, and as they do service is becoming available in more and more places. I
believe service is currently available in about forty countries. While the system
was designed and optimized for voice, Globalstar will be adding data capability
later this year. Globalstar only needs one million users to be profitable. Not one
million Americans or Canadians or Germans or Italians. One million people in
the entire world.
Yes, the Globalstar phones are too big (smaller phones are on the way), too
expensive (prices are dropping,) and have fewer bells and whistles than the
latest cellular phones. But, if you are fifty miles from nowhere, your Ericsson
or Nokia cellular phone is a paperweight. Under those conditions, Globalstar is
your only choice at any price now and for a long time. And when you take
your Globalstar phone to the city, it will work on the local cellular system at
regular cellular rates.
Mr. Winn and I believe in this story, which brings us to the shorts.
We believe that there are people and organizations out there that have been
taking advantage of the lack of general understanding about Globalstar to make
serious money shorting the stock. What Mr. Winn has proposed is that we take
our shares and put them in a cash account where the shorts cannot borrow
them rather than a margin account. If enough people do that, we believe it will
take some of the artificial downward pressure off the stock. If some of the
shorts get squeezed, they can't say they did not know this is a risky business.
Admittedly, Mr. Winn likes to hear himself talk, and this has been a pretty good
rant, even for him. But I believe he has made more people think about some
pretty important issues in the last few days and has gotten some publicity for
Globalstar. I'm proud of my friend.
But if you really want to know how he thinks, ask him what he believes
Globalstar should be doing in the pricing department. That is a very fine rant
indeed!
Andrew G. Williams
drew528@aol.com
* * *
I have been reading the posts on the Silicon Investor message board by
Maurice Winn for the last couple days thanks to a post on an AOL message
board about Globalstar.
My take on this is that this is really nothing new, the only thing different about
this is that it is being done above the table and out in the open.
Really the media and analysts are the worse than any message. The press will
make their decisions behind closed doors and then, "BAM" a couple of
downgrades come out and like a thief in the night you're through, finished,
looking at your computer screen feeling weak as if all the blood has left your
body. But I guess in any situation you should to be prepared and watch your
flank as you would in any investment, sport or business.
Frankly, the method used on this message board is kinder and gentler. The
bears have left their flanks exposed and the bulls have calmly called them out
and challenged them to a gentleman's duel face to face, rather than waking up
one morning and finding that they've been run through the back with the sword
of an analyst's downgrade or a pundit's trashing.
I wish positions could be more openly talked about out in the open rather than
secret upgrades and downgrade and whisper numbers. For instance, Emulex
Corp. (EMLX) is a great company that hasn't done anything wrong except not
meet unrealistic whisper numbers the analysts set for it. Analysts ran the price
up and I am sure got out first and now the market is punishing the company
when it hasn't done anything wrong. If the bears and bulls would have battled
out in the open, the price surely would have been more stable. Who do you
think made all the money in that crazy swing, the ones who pumped it and then
dumped it? Who got hurt?
I read your article and think that was well done and interesting. It is a very
timely topic and is indicative of the whole Internet movement.
Greg Campbell
Portland, Ore.
* * *
Your article on the Memorial Day Massacre left out the most important detail.
The article often mentions the intent to cause the stock to spike, and the intent
to manipulate the price. In reality, the price of this stock has already been
artificially deflated, and the scheme only seeks to correct this.
The stock is artificially deflated because over 25,000,000 shares have been sold
short - share that were borrowed without the express permission of the stocks
owners (owners give permission in the fine print of the margin documents they
fill out when they open accounts).
All that is going to happen on Memorial Day is that many shareholders will tell
their brokers not to "lend" out their shares to be shorted against. Nothing illegal
here. If, at this time, the large short positions can not find other stock to short
against they will have to close their positions out and be forced to buy. If this
causes the stock to spike (a short squeeze), then it is really caused by the large
short position, not the Memorial Day Massacre Mob - of which I plan to
participate.
It should also be pointed out that key to the plan is not to buy or sell the stock
in anticipation or reaction to this event.
The net result, if successful, will be only to remove the artificially-deflated
portion of the stock - that which was caused by investors selling more shares
than exist.
Michael E. Allard
Manchester, N.H.
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