Shares of satellite communications company Intelsat (NYSE:I) got hammered yesterday after the website Multichannel News reported that a new version of a bill making its way through Congress would cap the C-Band Alliance's take from a public auction of 5G spectrum at just $1 billion -- a sum that might have to be split three ways among alliance members Intelsat, Telesat, and Loral Space & Communications.
Today, Intelsat stock was falling even further, and was down 16% at noon EST despite more positive news out of Bloomberg suggesting that the companies could make a lot more than $1 billion. An announcement by Barclays Capital may be the cause of the drop.
As Bloomberg reported today, Intelsat, Telesat, and Loral might share in something "less than $10 billion" from the proceeds of the C-band spectrum that will be auctioned. On the one hand, that's a very small fraction of the $77 billion that the alliance thinks an auction might ultimately fetch. On the other hand, it's still potentially 10 times more than what Multichannel News was talking about Wednesday.
Despite this arguably (or at least relatively) good news, Barclays Capital today announced it is cutting its price target on Intelsat stock by more than 80%, from $20 to just $3.90, according to TheFly.com.
Is that fair? Maybe.
Bloomberg noted in its report that unless Intelsat gets at least $5.5 billion from this spectrum auction, it won't receive enough cash to bring down its $14 billion debt load to manageable levels, meaning bankruptcy is a potential outcome. On the other hand, if this is a negotiation, there seems to be a lot of room to haggle between $77 billion and $10 billion -- and a lot of potential for the U.S. Senate to come up with a fairer way to share the auction proceeds with the companies currently holding the 5G spectrum in question.
Barclays may disagree with this, but with Intelsat stock now down 84% over the past year, I think a lot of the risk has been bled out of this stock already, and there's finally room for the shares to rise.