Valueman:
I used $180mm, not $120mm. Here's why. GSTRF, as the publicly-traded vehicle, owns ~30% of the Globalstar LP and, as managing general partner, is entitled to a participation in the LP's revenue stream (2.5% of revenue up to $500mm and 3.5% above). The market is currently valuing the ownership interest and the management fees at $1.85bb.
I suspect that you are grossing up the $1.85bb (i.e. 1.85/.30) to extract a $6.1bb value for the LP and then multiplying by QC's percent ownership to obtain a $400mm+ valuation. There are two problems with this analysis. The major issue is the the general partner's management fee has a significant net present value which is being reflected in GSTRF's market cap. Secondarily, QC's interest is in the privately held limited partnership, so it is prudent in impose a liquidity discount.
In order to evaluate the management fee, one needs to model Globalstar's future revenues, extrapolate the cash flows and discount them back to the present. In this exercise, I have tried, as with all my QC analysis, to make highly conservative assumptions. While I can share the math off-line, I believe that the $180mm value (today) is reasonable for analytical purposes.
Hope this helps!
Gregg |
