Globalstar's Woes (GSAT)

Looking into recent IPO’s is usually more than interesting as far as financial investigations are concerned.  There are usually the year’s best performers among the names, but there are also some of the year’s most over-hyped piggies in stock-land. 

In our normal screen of 52-week and high and low stocks, we have noticed how the fairly recent IPO of Globalstar Inc. (NASDAQ:GSAT) keeps making the list of 52-week lows.  This one came public at the end of 2006 and if you review its chart you’d guess the company never issued one bit of positive news.

Globalstar is the satellite phone and data communications provider.  This is what is left of the "Old Globalstar" from the 1990’s.  They compete(d) against Iridium and both companies used to be public.  When Globalstar was in the pre-IPO stage the company stressed that this was not the predecessor company, although that doesn’t mean they didn’t assume the entire operations. 

• Here is the Iridium satellite phone featured on their site;
• Here is the Globalstar more common satellite phone.
• This one is not fully global, although if you review their coverage map you will see a large global footprint that is almost global.

The September short interest was 3.324 million shares and the company’s market cap is $485 million.  Shares are down 7% today at $6.50 on stronger than normal volume, but this is at least above the $6.12 intraday lows.  This one came public at with 7.5 million shares at $17.00, and that was 1 million shares more than originally proposed and in the middle of the $16 to $18 price range.  The prior post-IPO trading range before today was $7.05 to $17.68.

Globalstar isn’t expected to post a profit this year or next by the fewanalysts that cover the stock and this fell out of analyst favor earlythis year.  Iridium does claim to be profitable on their site.Calculating values on a company of this sort is quite difficult.  Thegood news is that satellites and the contracts that are in place forsatellites have value.  But that doesn’t ensure a win for holders ofthe common stock.

There is no way to know if this will keep heading lower or not, but companies that hit new lows frequently find it quite difficult to reverse a trend.

Jon C. Ogg
October 3, 2007

Jon Ogg produces the 24/7 Wall St. SPECIAL SITUATION INVESTING NEWSLETTER; he does not own securities in the companies he covers.