Event-driven hedge fund Maglan Capital lost 1.34% in April, but is still up 9.59% for the year (both net fees), mostly because of losses in the last few days of the month. The hedge fund was up 58.99% in 2013. Even with the setback in April, Maglan CIO Steven Azarbad and president David D. Tawil are confident that gains will pick up with some important catalysts in the near future, revisiting the investment cases for Madalena Energy Inc (CVE:MVN) and Globalstar, Inc. (NYSEMKT:GSAT).
Madalena drilling in Argentina yielding results
Madalena Energy Inc (CVE:MVN) is a Canadian oil and gas exploration firm with growing domestic operations that also owns 135,000 acres in Argentina’s oil-rich Neuquen Basin, which also has shale in the Vaca Muerta. Oil supermajors have announced billions worth of deals to drill in blocks adjacent to Madalena’s holdings, and Shell has had five successful exploration wells in the last year. Shell is also tripling its investment in shell plays to $500 million this year, while oil execs from multiple supermajors have talked about Vaca Muerta’s high potential.
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This momentum might be enough to speculate on Madalena Energy Inc (CVE:MVN)’s holdings in Argentina, but the company has also had its own initial successes. So far it has discovered six Sierra Blancas light oil pools and the two horizontal wells it has drilled have tested up to 2,235 barrels of oil equivalent (2,235 boe/d) and 1,945 boe/d respectively. Three more wells will be drilled this year, with the third and fourth scheduled to be completed this quarter, which could be a catalyst for Madalena’s stock price to pick up steam.
Globalstar on track to create worldwide WiFi
Globalstar, Inc. (NYSEMKT:GSAT) already does good business as a worldwide provider of satellite voice and data communications through its S-band spectrum, but Maglan is interested in what else Globalstar’s spectrum might be used for. Right now it is seeking approval from the Federal Communications Commission (FCC) to use repurpose its spectrum for a worldwide, wireless internet network. The process has proceeded without any significant setbacks so far, and the FCC has put the onus for proving that the repurposing could disrupt other communications on objectors while DISH, Sprint, Cisco, and others have come out in favor of the change.
Assuming the proposal goes through, Globalstar, Inc. (NYSEMKT:GSAT) would singlehandedly increase WiFi capacity by 33% without losing quality. Now that it’s being forced to pay to reach its customers anyways, how much would Netflix, Inc. (NASDAQ:NFLX) pay to stream through a new global network? Telecoms, cable companies, and cell tower companies might all be interested as well, and according to Maglan, “management is keenly aware of the possibilities and is exploring dialogue widely.”
Maglan notes Apple Inc. (NASDAQ:AAPL), or other tech giants could be interested in the company. Specifically, Maglan Capital states:
Imagine if Apple could offer its customers a ubiquitous, free, worldwide WiFi, with an unrivaled level of speed and clarity. How much more would customers be willing to pay for an Apple device? Apple is paying $3.2B for Beats by Dr Dre; Globalstar’s enterprise value is about the same. Other tech companies that could be interested include Google, Netflix, Amazon, Facebook. However, Globalstar’s spectrum could also have amazing, but different value to telecom carriers (e.g. Verizon), cable companies (e.g. Comcast) and cellular tower companies (e.g. American Tower). Management is keenly aware of the possibilities and is exploring dialogue widely.