October 18, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Clearwire (Nasdaq: CLWR ) plunged today by as much as 10% on reports that Sprint Nextel (NYSE: S ) is seeking majority control of the company.
So what: Sprint, which is already Clearwire's biggest customer and investor, disclosed that it was buying sufficient shares from Eagle River Holdings to boost its stake from 48%, to 50.4%, crossing the important 50% threshold that would make it a majority owner. That will allow Sprint to control the board, and subsequently have more say over its spectrum holdings.
Now what: The past week has been a rollercoaster for Clearwire, soaring to new highs on hopes that the company would be fully acquired after Sprint's deal with Softbank, only to plunge, and give back those gains when that speculation cooled off. That's the theme of today's drop, as well, as Sprint's move is a clear indication that it only wants a bigger piece of Clearwire, and not the whole thing. A Clearwire buyout is still a distinct possibility, but it doesn't look like it'll be any time soon.
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