Boy...talk about turning a silver lining into a sow's ear.
Last I checked, $56mm-$68mm still constituted real money.
Last I checked, public companies like Alcatel, Vodafone, Qualcomm and Loral were still governed by Boards of Directors that would most likely take a dim view of a 'cosmetic' investment. Do the pundits on this thread really believe that Vodafone management said, “let's throw Bernard a bone...give him a few million dollars...so he'll stop calling?” If so, I suspect that there are several psychotropic drugs available to treat your condition.
As opposed to the doomsayers, I would suggest that both of Bernard's financings are predicated on confidence in the future. The Bear Stearns financing allows GSTRF to "put" stock to BSC in tranches. Yes, Bear can immediately attempt to resell the stock, but it is still on the hook for $105mm...if push-came-to-shove, the put would most likely be used during a period of adversity. Said another way, when viewed negatively, Bear Stearns took on a $100mm falling-knife risk for a $5mm fee...not the cleverest strategy if one were bearish. However, let's invert the psychology. What if Bernard believes that the business is beginning to gain traction? What if he believes that, over the next six months or so, subscriber count and MOU will expand in a fashion that alters investor perceptions? If this were the case, wouldn't it make sense to sell equity in tranches to minimize the dilution? Wouldn't it make sense to get the founding partners to belly-up to the bar and inject enough capital to ensure their continuing commitment without handing them a huge proportion of the company at depressed prices?
Vodaphone, Elsacom, TE.SA.M and China Telecom are key partners NOT for their equity contribution, but because these companies represent a significant component of marketing complement that is selling the service worldwide. Were there no demand, were the business plan as flawed as the pundits suggest, I can envision no reason why these service providers did not cut and run right now. This is not nuclear physics....
While the financial commitment is material, I believe that Globalstar management perceives the requirement to be largely prophylactic at this juncture. I recognize this to be a balancing act; too much capital equates to unnecessary dilution while too little will be perceived as a statement of limited confidence.
I think the correct conclusion is pretty simple. The partner's came through with a meaningful incremental financing...before it was necessary and in advance of the business demonstrating trends that would necessarily support the investment. This is good. For investors looking to this financing as a stake to drive through the heart of the shorts, the deal most likely is not going to be enough. For investors looking to management to undertake a prudent financing, mitigating financial risk while sustaining an acceptable level of dilution, the deal is a statement of profound confidence. I cannot understand why people view the financing in such a binary fashion; one should logically presume either management believes the current transaction sufficient to allow for proof of concept or that the partners will sign up for another round as necessary.
For what it is worth, we believe Bernard delivered a businessman’s financing rather than a heroic gesture. We are delighted. |
