Shares of satellite cable and wireless company EchoStar (SATS +0.28%) rallied 15.5% on Friday, as of 2:18 p.m. EDT.
There was no company-specific news regarding EchoStar's core businesses, which include the upstart Boost Mobile wireless business, a satellite-based broadband business, as well as the declining DISH Network cable business and the over-the-top streaming bundle Sling TV.
However, EchoStar's "core" businesses may be beside the point these days. This summer, the company engaged in a series of transformative spectrum asset sales, which brought in over $30 billion in cash, along with $8.5 billion in SpaceX stock. EchoStar then followed up with another smaller spectrum sale, announced on its Nov. 6 earnings call, resulting in the acquisition of another $2.6 billion in SpaceX stock.
It appears those SpaceX stock acquisitions were quite savvy on EchoStar's part, as it was reported today that SpaceX is raising more money at a sky-high valuation -- likely much higher than the price at which EchoStar acquired its shares.
NASDAQ: SATS
Key Data Points
SpaceX is in talks with the private markets at an $800 billion valuation
On Friday, the Wall Street Journal reported that in recent days, SpaceX CFO Bret Jensen had told investors the company was in talks to sell shares at an $800 billion valuation.
While it's unclear exactly at what valuation EchoStar acquired its $11.1 billion in total SpaceX stock, it's possible that EchoStar received shares at just half that $800 billion number. In July, the WSJ reported SpaceX was working on an employee share sale which valued the company at "only" $400 billion. That was approximately 1.5 months before the transaction between SpaceX and EchoStar.
Image source: Getty Images.
EchoStar's SpaceX shares could account for almost all its valuation
EchoStar's current market cap, even after today's surge, is just shy of $25 billion. Theoretically, if EchoStar's $11.1 billion acquisition of SpaceX shares has now doubled in value, that would place the value of EchoStar's shares at roughly $22 billion – almost all of its current market capitalization.
Meanwhile, the company should have about $8.6 billion in net cash after all of its spectrum sales close, while the current wireless, broadband, and satellite TV businesses, while struggling with growth, are still bringing in over $1 billion in adjusted OIBDA (operating income before depreciation and amortization) per year.
In other words, if the SpaceX stake has really doubled in value in a span of a few short months, EchoStar's stock is now trading well below the value of its net assets, even after today's jump.
