Kerrisdale Capital Short Globalstar, Inc. (GSAT): Full Report

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Kerrisdale Capital is calling Globalstar, Inc. (NYSEMKT:GSAT) worthless and will be giving a live presentation on the subject today. There was earlier speculation that Kerrisdale would be presenting GPRO short case. Below is the full report from Kerrisdale – stay tuned for more analysis.

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Globalstar, Inc. (NYSEMKT:GSAT)’s equity is worthless. It is not worth $4 billion, or $3 billion, or $1 billion. It is worth nothing, and it takes little more than a rudimentary understanding of wireless communications to realize that. In this report and future reports, as well as live presentations, webinars, and our website, we will demonstrate clearly and irrefutably that (1) Globalstar’s Terrestrial Low Power Service (“TLPS”) concept is laughable and will never be commercially viable and (2) Globalstar’s spectrum holdings are unlikely to generate material value in any other use case. In virtually all scenarios, the combined value of the company’s unprofitable core satellite business and the potential terrestrial applications of its spectrum assets falls below its massive debt burden, making the stock a zero. Though some speculators view final FCC approval of TLPS as a positive “catalyst” for Globalstar, we already assume that TLPS will be approved. (If it isn’t, or if the rules are merely less favorable than expected, then the Globalstar bubble will just deflate that much more rapidly.)

Globalstar, Inc. (NYSEMKT:GSAT), currently trading at a fully diluted market capitalization of $3.6 billion after successfully convincing numerous hedge funds to buy into its story, is by far the most ludicrous stock promotion we have seen since our time exposing fake Chinese companies in 2011. The fourth-largest player in the slow-growing mobile satellite services (MSS) market, Globalstar uses its constellation of low-Earth-orbit satellites to offer basic mobile voice and data services in remote areas of the planet. Over the twelve months ended June 30, 2014, Globalstar generated just $88 million of revenue, $15 million of adjusted EBITDA, and negative $95 million of operating income. Since emerging from bankruptcy in 2004, it has racked up cumulative operating losses of $463 million, increased its share count by a factor of 13, been de-listed from the NASDAQ in 2012, defaulted on its debt in 2013, and put itself on a path to violate its financial covenants again in the near future.

Yet GSAT today has a $4 billion enterprise value thanks to an outpouring of misleading and ill-informed hype over its plan to exploit its spectrum licenses terrestrially. According to the company and its cheerleaders, this plan will unlock tremendous riches and incite a frantic bidding war among every technology and telecom company of significance. In reality, in the words of one of the many subject-matter experts to whom we have spoken, “If it [the TLPS proposal] went through, no one would care.”


Globalstar, Inc. (NYSEMKT:GSAT)’s TLPS concept is nothing more than the addition of one new Wi-Fi channel in the legacy 2.4GHz band – a licensed, for-profit channel that only authorized devices could use. In a world that already has three free, unlicensed channels in the 2.4GHz band and an additional 22 in the 5GHz band, the notion that one more channel, hypothetically accessible to only a circumscribed subset of users, could be worth many billions of dollars has elicited chuckles of ridicule and disbelief from every Wi-Fi engineer we could find.

Notwithstanding Globalstar, Inc. (NYSEMKT:GSAT)’s fear-mongering about debilitating “Wi-Fi congestion,” modern technology and network design have rendered co-channel interference perfectly manageable even in challenging settings like the Super Bowl and the Olympics, let alone less extreme but still densely populated environments like university lecture halls and Starbucks cafés. The immense success of Wi-Fi in high-density areas using free, unlicensed spectrum relies on spreading traffic across multiple channels; by contrast, TLPS, with just a single channel, is terribly ill-suited for exactly those places where Globalstar claims it will help. Ironically, TLPS, pitched as a solution to “congestion,” would suffer from it dramatically more than true Wi-Fi. The irrelevance of TLPS will be reinforced by the rapid ascent of the next-generation Wi-Fi protocol 802.11ac, which operates exclusively in the 5GHz band and will achieve performance that the 2.4GHz-only TLPS could never match. Ultimately TLPS is nothing more than GSAT’s latest gimmick to stave off bankruptcy, a stunt that rivals Allen Chan’s fake forests as the most successful stock-market fantasy we’ve ever come across.

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