Globalstar Responds To Kerrisdale Short

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Globalstar, Inc. (NYSEMKT:GSAT) issued a brief response to Kerrisdale Capital Market’s short thesis earlier this week, but yesterday evening Globalsat CEO Jay Monroe and Jarvinian managing director John Dooley (who helped to develop TLPS) held a teleconference to refute Kerrisdale’s arguments point by point.

“Kerrisdale has completely mischaracterized a combination of industry facts and Globalstar’s long-term spectrum and operational prospects all for its personal gain. Citing dozens of unnamed industry sources and revealing a lack of expertise of its own Kerrisdale is pushing forward a transparent agenda to drive our stock down,” said Monroe.

Globalstar quotes FCC, tech industry support for its plan

While Kerrisdale Capital founder Sahm Adrangi also looked at Globalstar, Inc.’s (NYSEMKT:GSAT) past financial difficulties and loss-making satellite business, the corer of his thesis is that Globalstar’s spectrum isn’t worth nearly as much as bulls imagine. He argued that Wi-FI congestion isn’t the major problem that GSAT says it is; the presence of other 2.4 GHz channels as well as 5 GHz channels will undermine the value of GSAT’s single, proprietary 2.4 GHz TLPS channel; 2.4 GHz TLPS will be more difficult to deploy than GSAT is signaling; and there is no international story for TLPS.

Monroe starts off by quoting statements from Cisco Systems, Inc. (NASDAQ:CSCO) and Google Inc (NASDAQ:GOOG), Federal Communications Commission chairman Tom Wheeler, former FCC chairman Julius Genachowski, and two other FCC commissioners all saying that Wi-FI congestion is a serious and growing problem. He also cites FCC commissioner Jessica Rosenworcel and a host of other organizations (Roberson & Associates, Meru Networks,, Alternative Wireless, etc) all saying that 5 GHz wireless can’t solve the problem on its own because it has lower range and worse solid object penetration than 2.4 GHz.

Existing devices would also be able to pick up 2.4 GHz TLPS with a software upgrade, which Monroe and Dooley argue should be a painless process as long as the FCC approval goes through smoothly. As for the international story, GSAT will wait on FCC approval before approaching other regulatory agencies, but Dooley argues that coupling satellites to use of GSAT’s spectrum is actually an advantage because it reduces deployment risk. Normally companies that license spectrum have a limited time to put that spectrum to use or they risking losing it; since GSAT’s license depends on its satellite constellation instead of on TLPS they can deploy at their own pace.

Globalstar sees some unintended benefits to the short campaign

One thing that has been interesting about this short from the beginning is that all the information is already out there, it’s just that most investors hadn’t taken the time to really learn the details about how spectrum works and the price is in limbo while people sort out technical details. During the presentation, Dooley argued that one benefit of the short campaign is that it gets rid of the hot money and forces other investors to really think about how spectrum should be valued. Since spectrum is a fixed natural resource that plays an increasingly important role in the modern world, this won’t be the last time markets grapple with its true worth.

The other benefit is that Monroe said he would love to increase his stake in GSAT at this price, though he’s currently restricted from doing so while he prepares quarterly numbers. He didn’t make any firm commitments, but suggested that he might invest more in a couple of weeks if prices stay low.

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