According to Bloomberg, Falcone’s fund lost 47 percent in 2011. The majority of its decline came from his Capital Partners Offshore Fund I highly-publicized LightSquared Inc. investment. The company is currently awaiting Federal Communications Commission (FCC) approval as it undergoes a review that shows the company’s system interrupts GPS equipment found in cars, tractors, boats and planes.
In addition to FCC approval, LightSquared Inc. is currently under investigation by the Senate Judiciary Committee, led by Senator Charles E. Grassley, Republican of Iowa. They are trying to determine why the FCC granted the company an important waiver.
As ValueWalk has previously noted, Grassley and Falcone don’t exactly have a warm and fuzzy relationship.
In response to the fund’s loss, Lew Phelps, a Harbinger Capital Partners spokesperson said in a statement, “The decline was primarily due to a conservative adjustment in the fund’s holdings of LightSquared, to be consistent with the results of work done by the fund’s third- party valuation firm. The valuation takes into account uncertainty about the outcome of political issues related to alleged interference with the GPS system by LightSquared transmitters.”
With the fund’s losses, Harbinger Capital Partners cut its LightSquared investment by 59 percent. Falcone threw his eggs into one basket for this as it represented $3 billion of the $5.7 billion in the fund he managed at the end of 2011.
There’s more bad news for LightSquared independent of Harbinger’s troubles. One analyst, Johnathan Atkin of RBC Capital Markets LLC, recently said that LightSquared could run out of money within the next six months, according to Bloomberg. But the company’s Chief Executive Officer Sanjiv Ahuja painted a different picture in a Dec.9 interview.
He said the company would have enough funds through the government’s review period, which is expected to continue until early next year.
Harbinger’s Additional Losses
In addition to the LightSquared investment, Falcone’s fund also suffered a 31 percent loss from a a portfolio of private- equity investments. Data is confidential but the fund’s biggest holding in the “side pocket account” is a 27 percent stake in Ferrous Resources Ltd , which the company is currently liquidating.
The remaining loss for the fund came from public company holdings including a a 54 percent share in Spectrum Brands Holdings Inc. The company fell 12 percent in 2011.