txlaw Posted December 13, 2012 Share Posted December 13, 2012 I will hold on for now. I want to see what Charlie Ergen does now that he got his ATC approval yesterday. There have been reports that Sprint is discussing teaming up with Ergen. I also want to see what Crest and Mount Kellett do. Link to comment Share on other sites More sharing options...
txlaw Posted December 13, 2012 Share Posted December 13, 2012 Btw, I'm sure you guys have heard that Crest filed a lawsuit against S/CLWR. http://www.reuters.com/article/2012/12/13/us-clearwire-lawsuit-crestfinancial-idUSBRE8BB1U920121213 Link to comment Share on other sites More sharing options...
txlaw Posted December 13, 2012 Share Posted December 13, 2012 Sprint to acquire Clearwire at $2.90/SH. Bloomberg reports. Yup, that's been the news of the day we've been discussing. Link to comment Share on other sites More sharing options...
txlaw Posted December 13, 2012 Share Posted December 13, 2012 Here's a thought I had. Let's assume that DISH does really own a large slug of CLWR debt and that S does need CLWR eventually. On the last CC, one of the analysts asked whether CLWR had ever thought about a spectrum/debt swap. It would be quite interesting to see Charlie Ergen take a chunk of spectrum from CLWR in return for cancelling the debt he owns and maybe signing an upfront purchase of spectrum. Then CLWR could continue to bide its time. Link to comment Share on other sites More sharing options...
Cardboard Posted December 13, 2012 Share Posted December 13, 2012 That is an interesting scenario, but keep in mind that Clearwire can only do a deal that is 20% below its net asset value without triggering a vote by the founding partners or veto if you will. That is about $450 million based on current book value. I am not sure if they could do a series of them over time, but there must be some clause to prevent it or at least put significant time between each one. With net debt at around $3.6 billion and them still blowing over $200 million a year in EBITDA, $450 million is a pittance. I think that their bargaining power is quite limited despite having a very valuable asset, if it could be truly auctioned off. We made a cardinal mistake by investing in Clearwire according to Peter Lynch in One Up on Wall Street or "Beware the middleman". That is the company that is too dependant on one or a few clients. On top of that, here we have a board and ownership structure against us. I am actually extremely happy by the current outcome since I often considered a permanent loss of capital with this investment and now it is turning into an interesting profit. Cardboard Link to comment Share on other sites More sharing options...
bmichaud Posted December 13, 2012 Author Share Posted December 13, 2012 We made a cardinal mistake by investing in Clearwire according to Peter Lynch in One Up on Wall Street or "Beware the middleman". That is the company that is too dependant on one or a few clients. On top of that, here we have a board and ownership structure against us. I am actually extremely happy by the current outcome since I often considered a permanent loss of capital with this investment and now it is turning into an interesting profit. RIMM Burke would scoff at this tomfoolery and say "I told you so"....despite what I consider to be a wonderful demonstration of why you should buy with a margin of safety. Originally, a $5 to $10 CLWR FV was batted around, and by averaging in as it dropped, the margin of safety was quite nice....thus protecting yourself from a take-under such as this, and even generating a nice profit as you pointed out. Nice work on hanging in there with it! Link to comment Share on other sites More sharing options...
brker_guy Posted December 13, 2012 Share Posted December 13, 2012 To all the non-believers who had bashed CLWR into oblivion and who tried to loot this little company. The gig is UP, boys!!!! So here are some facts to consider. 1) Spectrum Sharing Being Proposed by FCC. Remember being told to share by our parents when we were kids? http://arstechnica.com/business/2012/09/fcc-to-make-spectrum-sharing-reality-whether-carriers-want-it-or-not/ http://bits.blogs.nytimes.com/2012/05/29/how-spectrum-sharing-would-work/ 2) How much do we put on the value of the spectrum of CLWR? Well, here are the historical facts on auction prices of spectrum from telco providers... See attached. So, TxLaw, Cardboard, and BMichaud, I ain't taking anything less than $0.40 Per MHz-POP. Link to comment Share on other sites More sharing options...
Cardboard Posted December 13, 2012 Share Posted December 13, 2012 $0.40 per MHz POP on all 46.3 billion? That is about $10 a share based on enterprise value. I am sorry, but I wish you best of luck based on the current ownership structure. They will also claim that this company is losing money by the 100's of millions and needs to be fixed and refinanced hence the need to dilute the price for the spectrum vs other deals. It could actually be done, but we would need a true auction as I mentioned many times. If Clearwire said NO to Sprint and then filed for bankruptcy protection, which they could likely do based on their current financial situation and the fact that they can't sell enough spectrum or assets to honour their debt with the current structure, then AT&T and Verizon could enter the picture. That would make Sprint pay up. Unfortunately, Hesse is apparently a buddy of Stanton, Stanton has also very little skin in the game and Prusch and Cochran will likely negotiate a nice deal for them to continue with Softbank/Sprint. The incentives are not well aligned IMO to push for a hard bargain. I have not done anything yet. Still weighing scenarios. Cardboard Link to comment Share on other sites More sharing options...
txlaw Posted December 13, 2012 Share Posted December 13, 2012 That is an interesting scenario, but keep in mind that Clearwire can only do a deal that is 20% below its net asset value without triggering a vote by the founding partners or veto if you will. That is about $450 million based on current book value. I am not sure if they could do a series of them over time, but there must be some clause to prevent it or at least put significant time between each one. I said this: "It would be quite interesting to see Charlie Ergen take a chunk of spectrum from CLWR in return for cancelling the debt he owns and maybe signing an upfront purchase of spectrum. " What I left out unintentionally at the end was the word "usage." Upfront purchase of spectrum usage. In other words, a deal like FreedomPop or all these other people. That would avoid the limits on book value because only "excess spectrum" would be swapped for debt and then Ergen would get a very good wholesale rate on spectrum usage (data use) in exchange for the upfront cash. Then Ergen would have to spend less on Sprint wholesale for the video package he wants to sell. I do realize, as you point out, that they can't just outright sell all of their spectrum without Sprint approval. With net debt at around $3.6 billion and them still blowing over $200 million a year in EBITDA, $450 million is a pittance. I think that their bargaining power is quite limited despite having a very valuable asset, if it could be truly auctioned off. We made a cardinal mistake by investing in Clearwire according to Peter Lynch in One Up on Wall Street or "Beware the middleman". That is the company that is too dependant on one or a few clients. On top of that, here we have a board and ownership structure against us. I am actually extremely happy by the current outcome since I often considered a permanent loss of capital with this investment and now it is turning into an interesting profit. Cardboard I think price is the key factor. I always factored in the fact that S/CLWR were joined at the hip. In fact, that was part of the thesis. In other words, I realized that we would have S to deal with, but I also realized that S can't live without CLWR either. My average cost basis is sub-$2, but I did initially purchase some CLWR at close to $6 at one point. I think I was wrong on that price representing an MOS, and what I was really wrong about was how Sprint and Dan Hesse would conduct themselves. So your point is still well taken. Link to comment Share on other sites More sharing options...
brker_guy Posted December 13, 2012 Share Posted December 13, 2012 TxLaw, Now that we have a lawsuit being filed on Sprint by Crest Financial and their lawyers that have ties to the Bush clan, I think starting bid for CLWR will start at $10 per share. Then, they will start to negotiate down. Along all of this tumotuous ride with both S and CLWR, I was in the same boat as you. I did buy some shares at higher prices, but the bulk of my CLWR purchases were at $1.00 to $1.20 and lower and the bulk of my S purchases were at $2.25-$2.30. My cost basis for CLWR is around $1.30 and my cost basis for S is around $2.50. I think with Bancroft representing Crest, they are likely to file a motion to expedite and get this to a negotiation table quickly. I am not a lawyer, but that's my guess. So, prices with start to move lower starting at $10. I don't know if you guys still remember ValueCarl, but he has been on the same CLWR train as we are, and I told him that we also need to value in the 1mil subs which CLWR has that is outside of S contract. If I am not mistaken, they have 1.3mil true subscribers on their own network. For the rest of the valuation, we can debate on a side-bar... Link to comment Share on other sites More sharing options...
brker_guy Posted December 14, 2012 Share Posted December 14, 2012 Hi Cardboard, Earlier today, I responded to TxLaw's posts, but somehow I convoluted my response to him but excluded in it since you had said, this: $0.40 per MHz POP on all 46.3 billion? That is about $10 a share based on enterprise value. I am sorry, but I wish you best of luck based on the current ownership structure. They will also claim that this company is losing money by the 100's of millions and needs to be fixed and refinanced hence the need to dilute the price for the spectrum vs other deals. In essence, this was what I said to TxLaw but should have directed that response to you as well. I think with Bancroft representing Crest, they are likely to file a motion to expedite and get this to a negotiation table quickly. I am not a lawyer, but that's my guess. So, prices with start to move lower starting at $10. $10 is the starting negotiating price with Crest as the plaintiff, but I think we will see a settlement price that is lower than that... I agree with TxLaw's comments when he said: I think price is the key factor. I always factored in the fact that S/CLWR were joined at the hip. In fact, that was part of the thesis. In other words, I realized that we would have S to deal with, but I also realized that S can't live without CLWR either. Even though we might have violated a cardinal rule of investing in hindsight, the thesis that TxLaw and I started with regarding the bi-directional relationship of S and CLWR made it impossible to break. We were just unfortunate to have a moron of a CEO in Dan Hesse, who didn't know how to take full advantage of CLWR instead of abusing them like that... We were suffering with CLWR for awhile there, but no more!!! Link to comment Share on other sites More sharing options...
txlaw Posted December 14, 2012 Share Posted December 14, 2012 Second letter from Mount Kellett: http://news.yahoo.com/mount-kellett-sends-second-letter-140000464.html And reports that Softbank is capping Sprint's bid price: http://articles.chicagotribune.com/2012-12-13/business/sns-rt-us-clearwire-sprint-softbankbre8bd039-20121213_1_sprint-s-clearwire-clearwire-shareholders-clearwire-corp If the cap reports are true, then perhaps it's time to sell excess spectrum and say "eff you" to Dan "the Hustle" Hesse and Son San? Link to comment Share on other sites More sharing options...
brker_guy Posted December 14, 2012 Share Posted December 14, 2012 I second that idea, TxLaw. It is time to sell off the excessl spectrum in the open market. Link to comment Share on other sites More sharing options...
Cardboard Posted December 14, 2012 Share Posted December 14, 2012 The question was asked in a previous call about why not selling just a little bit of spectrum to help value the company better? That could be a terrific defense strategy in that case since as mentioned by Mount Kellet in their letter, a financial firm will have to provide a fair value opinion to minority shareholders to accept the offer that would be endorsed by the board. It would be awfully difficult for both parties to support an offer that would clearly have no bearing to what is possible to get out there. I think that we will need the help of Stanton, Comcast, Intel or BrightHouse in our situation to do such thing or negotiate hard. If these guys cave in, then I don't see how we can extract much more. Based on all the comments that I have read, it looks like that Sprint would have to cough up $2 to 3 billion more to buyout the minority shareholders without major fights. To be in the position that they will be in with spectrum in the U.S. it is likely worth every penny. However, I can't see them making us gifts based on their current position of strength. Something has to change, like a financial backer helping dilute Sprint's interest below 50% without destroying the share price and helping the company continue as an independant firm. Nice afternoon pop anyway! Cardboard Link to comment Share on other sites More sharing options...
Guest rimm_never_sleeps Posted December 14, 2012 Share Posted December 14, 2012 i don't think clwr is going to do anything. after all the bod is controlled by Hesse. I believe that money managers are going to pressure S into raising their bid. this is the "icahn" way. that's why I bought this morning. Link to comment Share on other sites More sharing options...
CONeal Posted December 17, 2012 Share Posted December 17, 2012 Deal finalized at 2.97 http://finance.yahoo.com/news/sprint-reaches-deal-buy-clearwire-122547855.html;_ylt=AqQqm2gGjN1iREgeXPQCwz6iuYdG;_ylu=X3oDMTRwNTJyZmxlBG1pdANGaW5hbmNlIEZQIFRvcCBTdG9yaWVzIG1peGVkIGxpc3QEcGtnAzkzMzMzMDEwLWUxMDctMzJkYy1iMTMwLTM0NGI3ZDdhZjE3NQRwb3MDNQRzZWMDTWVkaWFCTGlzdE1peGVkTFBDQVRlbXAEdmVyA2M2NzQ0ZmEzLTQ4NDktMTFlMi1iZmZkLTY0MzczZDRmMjg2Ng--;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3 Link to comment Share on other sites More sharing options...
txlaw Posted December 17, 2012 Share Posted December 17, 2012 Very interesting. Here's the presentation: http://www.sec.gov/Archives/edgar/data/1442505/000119312512504139/d455046dex991.htm I will listen to the CC when it is put online. Looks like rimm was right that the BOD would go along with the deal, but not necessarily that they would simply roll over per se because they are controlled by Hesse. In fact, it looks like the BOD unanimously voted in favor of accepting the $2.97 deal that is on the table from Sprint (even the independents). This makes sense, as the minority shareholders now essentially have the McCaw deal. We are fairly sure to get the $2.97 in cash, and there may be a possibility of receiving more if somebody else steps up to the plate (I'm not aware of any breakup fees or anything of that nature). Very notable is the slide that describes the "sell excess spectrum" alternative. CLWR received one "credible, but preliminary proposal" from somebody, but the value offered was "well below recent speculation." I have to think this was Charlie Ergen and that he gave his proposal pre-FCC approval of his ATC network. However, Ergen apparently has expressed no recent interest, though he is on a trip to Asia (maybe to talk to Masayoshi Son?). The presentation also notes that no "second major wholesale customer" has stepped up to purchase services from CLWR. Given the short timeframe between board acceptance of the Sprint offer and the DISH FCC approval, it seems likely that this move is intended to light a fire under Ergen's butt and make a decision on whether or not he will partner as partial owner of S/CLWR or purely as a wholesale customer of S/CLWR. In any case, now that the $2.97 is fairly solidified, it doesn't make sense for most of us to sell out. First, we'll have to pay taxes on our capital gains this year. Second, Sprint still has to get to 75% of all shares and a majority of the non-Sprint shares. They don't have it yet, even with support from the CableCos. Fascinating and a true learning experience! Link to comment Share on other sites More sharing options...
brker_guy Posted December 17, 2012 Share Posted December 17, 2012 TxLaw, Very fascinating presentation indeed! I was hoping that free gravy train would get to $4, but I am not crying at all about $2.97. It's been a very rewarding "special situation" for me in S and in CLWR. More importantly, it drives home another point for me about quality management making a big difference in a deal. Had we have someone with better understanding of the telecom industry and one who has a good strategy, the outcome of this might have been far better than we thought. Dan "the Hustle" Hesse is not that kind of quality leader and quality manager we can look forward to in the next company... In any case, now that the $2.97 is fairly solidified, it doesn't make sense for most of us to sell out. First, we'll have to pay taxes on our capital gains this year. Second, Sprint still has to get to 75% of all shares and a majority of the non-Sprint shares. They don't have it yet, even with support from the CableCos. I agree with those statements completely. There is no need to really do any selling at this price level, other than helping Uncle Sam collects from you a little faster. Let the scenarios play themselves out including the lawsuits and see where the chips may fall. The downside is $2.97, not too bad of a downside if you ask me. :-) brker_guy Link to comment Share on other sites More sharing options...
txlaw Posted December 18, 2012 Share Posted December 18, 2012 S/CLWR conference call transcript and presentation: http://www.sec.gov/Archives/edgar/data/101830/000119312512505069/d456300ddfan14a.htm Interesting how, every month, CLWR equity will get diluted through the convertible notes to the tune of about 50 million shares a month. I suppose the more delay there is in some other offer/deal being put on the table, the less attractive any such deal will be for the person who wants to do such a deal. You gotta hand it to these guys. This is very creative stuff in a sense. It's just too bad that business has to be done this way, though. Really interested in reviewing the detailed proxy that will come out. Link to comment Share on other sites More sharing options...
Guest rimm_never_sleeps Posted December 22, 2012 Share Posted December 22, 2012 ergen opposes s/clwr http://apps.fcc.gov/ecfs/document/view?id=7022088147 Link to comment Share on other sites More sharing options...
txlaw Posted December 22, 2012 Share Posted December 22, 2012 Yikes, getting even uglier. Ergen wants more time to file a petition to deny the S/CLWR acquisition. At the same time, DISH DBS raises $1.5 billion for "for general corporate purposes, which may include spectrum-related strategic transactions," not too long after DISH gets their FCC approval, S makes a CLWR bid, and Ergen goes to Asia for some undisclosed reason. These guys like playing games, don't they? Link to comment Share on other sites More sharing options...
Guest rimm_never_sleeps Posted December 23, 2012 Share Posted December 23, 2012 i don't think ergen necessarily wants to buy clwr spectrum or the company. he knows that S is getting clwr spectrum on the cheap and the combination will be a formidable wholesale competitor to his lte project. I think it's pretty well known that goog is his customer. $1.5b is to fund the build out of his network. ergen may want to put a monkey wrench in the s/clwr process and buy himself time. Link to comment Share on other sites More sharing options...
txlaw Posted December 23, 2012 Share Posted December 23, 2012 Perhaps. I think it's too hard to make a call on what he's going to do. Ergen's too good of a poker player to figure it out. Ergen may have thought he could do a wholesale deal or JV with S on the cheap when Softbank was not in the picture (i.e., when S's finances were much worse) and because he owns CLWR debt. That's probably not going to happen now, though, at least not on the terms he may have been demanding. It was fairly well known that S and CLWR were talking before and battling it out in the FCC whilst doing so. What he's going to do now with that $1.5 billion is anyone's guess. No matter what, it would take time to build out his own network -- he'd have to buy more spectrum (H-block?) and host it on somebody else's towers (brker_guy would know better than me on the technical aspects). Ergen wouldn't be ready to sell to GOOG for a while (if that was his plan), and his network alone wouldn't be robust enough anyway. S/CLWR will not merely be a formidable competitor -- it will blow any network Ergen has out of the water. I'm done making deal predictions on this one -- at least in public ;) -- and will stick to the value proposition (at least worth $3 but probably more). Let's see what happens. Link to comment Share on other sites More sharing options...
txlaw Posted January 8, 2013 Share Posted January 8, 2013 DISH makes $5.15 billion bid for CLWR!!!! http://dealbook.nytimes.com/2013/01/08/dish-network-makes-bid-for-clearwire-trumping-sprint-offer/ Hot damn! I love being right and making money at the same time. Your move, Dan. Link to comment Share on other sites More sharing options...
LC Posted January 8, 2013 Share Posted January 8, 2013 DISH makes $5.15 billion bid for CLWR!!!! http://dealbook.nytimes.com/2013/01/08/dish-network-makes-bid-for-clearwire-trumping-sprint-offer/ Hot damn! I love being right and making money at the same time. Your move, Dan. Damn! I never got around to doing my research on CLWR for my account, but congrats to you and those who did! Link to comment Share on other sites More sharing options...
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