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Microcap & Penny Stocks : Globalstar Telecommunications Limited GSAT
GSAT 50.53+4.7%Nov 7 9:30 AM EST
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To: KyrosL who wrote (17298)9/30/2000 7:00:29 AM
From: KyrosL  Read Replies (3) of 29986
 
GSTRF share price

In a previous post I laid out four G* earning scenarios and the corresponding short/medium term share price:

Message 14446818

Three of the scenarios represent different levels of G* success, the fourth G* bankruptcy. Here is a summary:

1. G* sells all its minutes at current wholesale price of 47 cents/min. Stock price $333
2. G* sells its minutes at 24 cents/min. Stock at $149
3. G* sells its minutes at 12 cents/min. Stock at $55.
4. G* goes bankrupt. Stock at $0.

We can use these scenarios to figure out the GSTRF share price. To do this we need to assign a probability of success (S) and spread it among the three success scenarios. The probability of bankruptcy will be (1 - S). To simplify things, we assume that the probability of success is distributed equally among the three success scenarios. Based on these assumptions:

GSTRF share price = 333*S/3 + 149*S/3 + 55*S/3

Plugging the current GSTRF price of around $9 in the above formula and solving for S, we see that the market believes that

S= 9*3/(333+149+55)=0.05 or 5%

So, the current GSTRF share price reflects a belief that the probability of G* bankruptcy where shareholders get nothing is 95%.

You can plug your own success probability in the above formula to figure out what your expectation of GSTRF price is. For example, if you believe that the probability of G* success is 0.40 (or 40%), the expected short/medium term GSTRF price is $72.

Kyros
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