Valueman:
As I said before, Globalstar's ownership structure is byzantine. The revenue participation in question is paid to the Loral Qualcomm Partnership (LQP), of which QC and Loral Space Systems are co-limited partners, but a Loral subsidiary is managing general partner. The latter provides the ambiguity that underlies our differing valuations.
Remember that I would certainly prefer to place a higher value on the QC asset. However, having re-read the GSTRF offering memorandum, and the Loral Space Systems and Qualcomm 10-K footnotes, I can find no specific disclosure that entitles QC to a pro-rata revenue participation-- these financial terms would be delineated in the LQP partnership document (which, unfortunately, is a privately-held venture between QC and Loral).
However, the economic basis for my conclusion is straightforward. Both Loral and Qualcomm are supplying technological support, IPR and are hardware/services vendors to Globalstar L.P.. Each is being paid accordingly. However, a Loral subsidiary is providing management (i.e. the general partner of LQP), and therefore Loral personnel are actually running the business. Logic would dictate that revenue-based incentives would accrue to the people responsible for executing the business plan and creating the revenue. While I recognize that it is not impossible for QC to participate in some of the revenue sharing, through its limited partnership interests in LQP, I cannot prove this by the footnotes. In the absence of a corroborating footnote, I prefer my more conservative valuation which excludes the cash flows from the revenue participation.
BTW, having checked my spreadsheet repeatedly now, my estimate was $180mm. If I typed $120mm previously, then I was in error and I apologize for any confusion.
Best Regards,
Gregg |
