Why Clearwire Shares Tumbled

Is this meaningful or just another movement?

Sean Williams
Sean Williams
Sep 18, 2012 at 12:00AM

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: Fourth-generation wireless broadband service provider Clearwire (Nasdaq: CLWR) appears to have again lost connection with investors, down as much as 12%, after Time Warner Cable (NYSE: TWC) announced it'd be selling its stake in the company.

So what: Time Warner Cable purchased a stake in Clearwire in 2008 for $550 million. That stake, 7.8% of outstanding shares, is worth just a paltry $73 million today. It now appears that Time Warner Cable is going to expand its 4G LTE partnership with Verizon (NYSE: VZ) and is perfectly comfortable jettisoning its Clearwire stake at a loss.

Now what: Clearwire can't seem to catch many breaks. Last week, Clearwire did announce a 4G wholesale agreement with EarthLink (Nasdaq: ELNK), but beyond this deal, it's just been one bad announcement after another. Sprint Nextel (NYSE: S), despite buoying Clearwire with upwards of $2 billion in investments, has spurned the company in favor of other LTE possibilities. Also, there's that little bit about Clearwire's $2.9 billion in debt that comes due in 2015. Unless Clearwire puts a yard sale sign up for its spectrum, I don't see how it will survive.

Craving more input? Start by adding Clearwire to your free and personalized Watchlist so you can keep up on the latest news with the company.