Iridium Files for Chapter 11 Brian Graney (TMF Panic)
August 13, 1999
Providing the denouement of a more than year-long descent, global mobile satellite provider Iridium World Communications (Nasdaq: IRID) threw in the financing towel today and filed for Chapter 11 bankruptcy protection.
After hitting an all-time high of $70 11/16 per share in May 1998, Iridium's stock has been on a path straight downward ever since. The descent culminated with the company entering penny stock-land yesterday and sliding lower again today before Nasdaq halted trading just after 2:00 p.m. EDT at $3 1/16 per share. Whenever the stock reopens for trading, its ticker will have the ignominious Nasdaq-mandated "Q" designation for bankruptcy attached at the end.
Through it all, the company sounds nearly as steadfast and sure of itself as it did when it completed the launching of the world's first globe-encompassing satellite system last year. "Iridium will open the world of business, commerce, disaster relief and humanitarian assistance with our first-of-its-kind global communications service," said then-CEO Edward Staiano in unveiling the service last fall. Vice President Al Gore made the inaugural call on Iridium's network, dialing up a great-grandson of Alexander Graham Bell. Hopefully, he didn't follow-up on that call with a call to his broker.
In a statement announcing the bankruptcy filing, present day-CEO John Richardson sounded as hopeful as possible. "The action is the most efficient way to conclude Iridium's restructuring negotiations,'' he said, referring to the filing decision. "We are confident that Iridium will emerge from this process as a stronger and more vibrant company in the telecommunications marketplace.'' Lead investor Motorola (NYSE: MOT) sounded equally optimistic, throwing its support behind the filing and forecasting that Iridium will be able to broker a financial restructuring agreement with its bank creditors, bondholders, and strategic partners "within 30 days."
With the firm seeking to reorganize its business under the eyes of the courts, attention now turns to what will happen next. Bankruptcy proceedings have a way of hitting snags and lasting for months, if not years. Speculating what will happen to this stock and this company as the reorganization period proceeds is not a very worthwhile pursuit for long-term investors. Rather, Fools still enchanted by the satellite phone business' growth opportunities would be much better off spending their time drawing lessons from Iridium's fall and examining what the bankruptcy portends for the future of Iridium's global satellite rivals, such as Globalstar (Nasdaq: GSTRF) and ICO Global (Nasdaq: ICOGF).