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Technology Stocks : Loral Space & Communications -- Ignore unavailable to you. Want to Upgrade?

To: Bernard Levy who wrote (4474)	9/3/1998 4:25:00 PM
From: Geoff	Read Replies (2) \| Respond to of 10852

Bernard, I remember that some time ago people on the Fool discussed their portfolios and the what many thought was the proper allocation of LOR to G. The reasoning went that since LOR was far more diversified than G, it represented a less risky investment, thus own more of it. But, because LOR also owned a nice big stake in G* (I think it was 34% or 38% at that time) that again, more LOR than G* should be owned. So Readware and some others came up with the handy 10-to-1 ratio of Loral shares to Globalstar shares. Thus, if G* rocketed higher, you benefit a lot, but if it tanks, LOR was supposed to protect you more. In the recent weeks, it seems that the entire satellite group has been in collapse, so no relief at all was gained. I never really had the 10-1 ratio... but here are some posts from the LOR FAQ archive that may explain the rationale better... "Reply 1746" - 1/25/98 - Valueman: The fully diluted total number of Globalstar LP shares is 116 million, after conversion of all warrants and CPEOs. Loral owns a fully diluted total of 44 million LP shares, or 38%. Their ownerships consists of G* common shares, warrants, LP units, and G* conv. preferred CPEOs. The publicly traded G* consists of a fully diluted 42 million LP units, or 36% of total. QCOM owns 7% fully diluted, Vodaphone6.1%, and Airtouch, 5.2%. Now for the math. I am going to assume a fully diluted, post-Orion-acquisition total share count for Loral of 280 million. That gives us .1571 G* share per share of Loral. At today's price that equals $8.27 of G* per share of Loral. Using the fully diluted numbers saves redoing this later as shares and warrants are converted. This is a conservative way of looking at the future structure. In other words, for $14.54, you can presently purchase Skynet, Orion, SatMex, Cyberstar, SS/L, and the various small investments-that is indeed a bargain!! In simplest terms, Loral now owns close to 39% of Globalstar (GSTRF, referred to as G*). LOR increased its ownership of GSTRF to 38.7% by paying for it in cash, and as of today, LOR gets 40% of everything GSTRF rakes in. GSTRF plans to launch and operate a 48 satellite constellation offering telephony services primarily in developing natiosn. It is a consortium owned by lead manager LOR, with Qualcom, Alcatel, DA Aersospace, and Alenia S.A. The stocks of LOR and GSTRF do not appear to move in a direct relationship. Readware recommends a 10:1 ratio of 10 shares LOR to 1 share GSTRF, due to GSTRF's higher risk. LOR is more diversified than GSTRF, and GSTRF is going to be contributing a great deal to LOR's bottom line. 6/1/97 - Readware: We have recommended all along a 10:1 holding in LOR versus GSTRF. We do believe that GSTRF by 2002 will be near $385/share-- if management executes its plan. However, given the mob psychology nature of money managers, the slightest mistake in a launch etcetera for GSTRF would cause a punitive pullback (an uncontrolled selloff) in price until that mistake was corrected. Given that high degree of sensitivity to an incremental flaw in GSTRF, ownership in LOR provides a greater stability to participation in the growth of space based communications. I hope this helps... there are some other posts in the archive at the FAQ as well, jaberwocky.com and jaberwocky.com geoff