Why Clearwire Shares Plunged Yet Again

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  ) have plunged yet again, this time down by 13%, as BTIG analysts added some context to Sprint Nextel (NYSE: S  ) increasing its stake in the company.

So what: This is the fourth daily move of at least 10% in the past five days, soaring on Monday, then plunging on both Tuesday and Thursday and again today. Yesterday, Sprint said it was seeking majority control of Clearwire by increasing its stake to 50.4%. That caused a drop because investors were disappointed Sprint didn't want to acquire the entire company.

Now what: Today BTIG points out that Sprint has owned majority stakes in the past, yet in some instances was not able to maintain control, such as not being able to stop Clearwire from opening retail stores previously, among other operational decisions. BTIG then says it would be possible for Sprint to sell its stake back down to below the 50% threshold if it's not able to gain control. The firm mentions that Sprint made a similar move last summer.

Interested in more info on Clearwire? Add it to your watchlist by clicking here.

 
 

Evan Niu, CFA, has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On October 19, 2012, at 8:31 PM, spokanimal wrote:

    It's all irrelevant, Evan.

    Beyond all the daily gyrations of the day traders lies the reality that Softbank covets Clearwire's massive spectrum just as much as it does sprint's dense, national infrastructure and subscriber base.

    In the end, Softbank requires control of Clearwire and nobody can get it besides sprint because they'd have to GO thru sprint to get it.

    Softbank doesn't want to finalize the proposal and head to the FCC/SEC/DOJ with it unless sprint has 50%-plus, which they now have... and there's little doubt they'll want full board control (eg: 100% tender) once Sprint can afford it without hampering the financing of the Network Vision project... eg: next summer after they get their 8 big ones and not NOW when NV is job-1.

    Intel and Comcast didn't bite prior to sprint's overatures to McCaw because they see the inevitability of receiving CLWR's true value... and McCaw has his "make whole" clause to ensure he get's his. The rest of the lemmings out there sold off because, after all, their day-trading lemmings who hardly know what a make-whole clause even IS.

    Softbank is eeking by with hardly more 2.5ghz spectrum for it's TD-LTE efforts in japan than sprint has (5x5 currently) for it's FD-LTE effort stateside.

    From softbank's perspective, clearwire's 160mhz of contiguous 2.5ghz, world-data-standard spectrum is panacea... you'd think that more market lemmings would add it's market value ($4.2billion book value NOT) to the value of clearwire's 2009/2010 vintage infrastructure, subtract their $4.2 billion in debt, and come up with something more than a drug-enduced, Tokio-slum worth of value...

    ... because Intel, Comcast, and Craig McCaw obviously have since softbank arrived in a pool of drool and they are asking far more than today's closing price... plus 3 years of "make whole" guarantees to account for what's obviously coming next.

    Spokanimal

  • Report this Comment On October 21, 2012, at 2:07 PM, mbablitz wrote:

    Dan Hesse has been deceptive with his comments regarding CLWR. One day he implies CLWR is not part of the Softbank deal and the next day he is cutting private deals to gain control of CLWR. All the talk and private dealings are to keep CLWR's stock from exploding up to its true value.

    Given the amount of data optimized spectrum CLWR has, I would speculate CLWR is Softbank's most desired target. If so, Softbank's first priority would be to gain control of CLWR, as cheaply as possible.

    That's exactly what is happening via its newest surrogate, Sprint. If Softbank Had gone after CLWR first, it would have made Sprint more expensive and CLWR more expensive. Buying S first, makes this a buy-one get-one half off deal.

    There is a reason CLWR has not made any comments regarding Sprint or Softbank. In my opinion, there is much more going on below the surface. The bubbles are rising but the submarine is still down and only Softbank knows where it will go.

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