Clearwire Still Above Implied Standalone Value

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Clearwire Corporation (NASDAQ: CLWR) may soon find itself between a rock and a hard place. This is not due to the company’s action, nor it is the company’s fault. With Sprint Nextel Corp. (NYSE: S) now being acquired with Softbank in Japan taking a 70% stake, the deal leaves Clearwire in an uncertain position. The good news is that this is actually a “hopeful yet uncertain position.”

It was last week when it became confirmed by CNBC’s David Faber that Clearwire’s stock shot drastically higher. At the time the stock had risen slightly above $2.00, and we showed that options traders were prepared for Clearwire to rise as high as $2.30 or $2.35. Well, even though we predicated that anything is possible the reality is that the price of poker has gone up handily. Shares are around $2.67 after a 15% gain today and shares briefly hit a new 52-wee high today. The prior high was $2.64 and the new high is $2.96.

We would make a reminder here that Sprint made sure to say in its release that it was not under any obligation to increase its commitment to Clearwire. It’s SEC filing specifically said, “The transaction does not require Sprint to take any actions involving Clearwire Corporation other than those set forth in agreements Sprint has previously entered into with Clearwire and certain of its shareholders.”

If you go back to options, the options traders are now putting what would appear to be a higher-end value of $3.30 to $3.40 if you are willing to go out to the November and December options expirations. There is one thing to remember here: options trading is simply one of many tools to try to allocate a future value to a scenario. Call options and put options frequently either overestimate or underestimate a value.  That is what makes a market, and in a zero-sum game there is a winner and a loser.

For whatever this is worth, Clearwire’s fundamental standalone consensus per share valuation is $2.21 according to the consensus estimates from Thomson Reuters. We would also warn that the ten analysts have a price target of $1.00 to $4.00 on Clearwire. And for the record, analyst targets also often do not matter when it comes to a buyout situation or other situation.

JON C. OGG

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