Jetter, you really should reconsider your short. It must be starting to dawn on shorts that the first leg of their bet, that Globalstar would run out of money is plain wrong. The shorts originally had Globalstar going broke in October, if not September [that's NOW!!]. They were wrong.
There is piles of dosh coming in and this is without bothering with partners.
Jetter, traditional means are not necessarily the best means. Initially I thought that this looked like the Techniclone bottomless pit share sale where shorts created a very low price which enabled them to buy stock which they then sold into a dropping market and the shorts and share buyers made a fortune from a badly run share sale. Techniclone had boxed themselves in.
This is quite different.
Globalstar has got about the biggest short interest of all companies. That is a very significant untraditional feature of the capital base of Globalstar.
Every one of those shorts has announced to the world that they are in the market to buy some Globalstar shares and will do so at some stage in future. Either at a time of their choosing, or at a time of their broker's choosing if they are running out of money. In the event of a dramatic short squeeze, there will be many shorts who lose their money in the same way that people who bought Globalstar shares on margin at $50 are likely to get margin calls and be sold out at $6 - the decline would have been partly due to people reluctantly selling out [or being sold out].
So, Bernie and co took a look around to see who wanted to buy stock and they saw 35 million shares owing by shorts who would be wanting to buy. Unlike QUALCOMM and other partners, who will buy on a negotiated basis at a price acceptable to them = no sale if the price is too high, the shorts might not have a choice.
Without this $105 million deal, if there is a short squeeze, Globalstar would not be able to sell shares at what might be temporarily high prices. They would watch the share price zoom to $100 or $50 or whatever and not be able to sell. QUALCOMM wouldn't come up with $100 million at $50 a share if it was obviously a short squeeze price.
As a short squeeze proceeds, some longs will sell into it. Those shares will then be shorted once shorters think that the price has risen to shortable levels [which appears to be $10 right now but they might wait until a higher price since it would be better to short them again at $50 than $15].
The cost of the proceeds seems to be in the normal range for a traditional financing method, so the $100 million isn't expensive.
Shorts must be starting to sweat a little. Aren't you?
The other leg of short's argument, that minutes won't sell and neither will the phones because they are too expensive, is in the process of being removed.
Now that funding is available, it seems that Globalstar will easily get through all of 2001 while still losing money. Partners will buy more shares if they can get them cheaply enough.
The little peak in share price over the past week was obviously insiders knowing a deal was in the offing and the selloff was 'on the news'.
Now we wait for MOU report and subscriber growth sometime in the next couple of months. That long delay between reports must damage subscriber acceptance and the share price. Ignorance is NOT bliss when one is an investor. Some subscribers will wait and see whether anyone else is buying before they throw good money after bad [Iridium's].
If Globalstar thinks the system is so financially secure, they could supply phones for no charge and get the money back in the minute price. Maybe they figure such a plan would just confuse their marketing message.
Meanwhile, it's a good funding option, albeit untraditional. I hope you have your money ready to buy those shares which Bernie is about to sell to you Jetter! You shorted, so get ready to buy as you have promised your broker you will.
It was nice of him to arrange to sell you a whole lot rather than make you buy them from me. I can tell you that you would NOT like the price I would demand from you. Bernie will probably sell them to you for only $35 a share. He paid about $23 a share a year or two ago with his own money, so I don't see why he'd want to sell them to you cheaper than what he paid.
While he waits for a short squeeze, he can proceed with organizing partner funding as a backup.
My bet is that a lot of shorts have already covered in the past few days [the short interest had already started dropping in the last report]. Are you going to be the last one out Jetter or are you prepared to ride it up and buy Bernie's new shares?
Mqurice |
