Mobile satellite service-specialist Globalstar (GSAT 0.01%) is a fascinating company. A game-changing plan to open a terrestrial mobile network built around Globalstar's satellite-grade radio spectrum licenses was recently abandoned in favor of a more traditional LTE solution.
Dealmaking in the wireless space is painting buyout targets on the company's back. Its share prices have surged 70% higher in 52 weeks, and the stock has nearly quadrupled from December's yearly lows.
Yet, Globalstar's news feed remains eerily empty, and Wall Street has turned its back. The company gets earnings estimates and price targets from just a single analyst firm. How come?
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Penny-stock fallout
Globalstar may boast a $2 billion market cap, 13% annual sales growth, and positive cash flows, but the stock still trades at roughly $2 per share. Moreover, you won't find Globalstar on either of the two major stock exchanges.
Instead, the stock trades on the New York Stock Exchange's (NYSE) small-cap market, also known as the AMEX exchange. That's one way to save on the beefy market access costs charged by the Nasdaq and the regular NYSE board, but also a ticket to lower liquidity and less media exposure.
The low share price also limits the number of Wall Street firms that are willing to look at Globalstar's shares. Many firms have established hard limits on the market caps and share prices of stocks they want to cover, and Globalstar fails many of those share-price tests.
The company could, of course, perform a reverse stock split to bounce out of the $2 share-price range in a hurry. But that's a mostly pointless exercise in paperwork that carries its own filing fees, and reverse splits are often seen as a mark of desperation, anyhow.
Enjoying the sound of silence?
A little radio silence might actually be what Globalstar's management wants. CEO and chairman Jay Monroe is also the company's largest shareholder. The 490 million shares held under Monroe's management represent almost half of Globalstar's total share count.
Keeping Globalstar out of the media limelight and the regulatory pressures of trading on a major exchange might suit Monroe just fine. If there are buyout talks going on in the background, the current situation lets Monroe hammer that deal out with less pressure from other shareholders and curious analysts. Following the recent bidding war for Globalstar's fellow wireless spectrum holder Straight Path Communications, rumor has it that Globalstar could find a buyer among major American telecoms, or among technology giants lacking a wireless-spectrum strategy.
Whether or not that's the real motivation behind Globalstar's willful avoidance of both Wall Street and Madison Avenue, I don't expect the situation to change anytime soon. The glaring exception to this rule of thumb would be if the company takes a buyout deal, which would trigger a lot of media attention overnight.
None of this should stop you from considering Globalstar for your own portfolio, by the way. The stock does look expensive by most measures, but that could change in a hurry if the plans for a global wireless network on a terrestrial LTE platform works out as planned.
