On 6 October 2014, the New York-based stock trading firm, Kerrisdale Capital Management, caused a fall on the stock market price of mobile satellite operator Globalstar Inc. when it publically declared that the firm’s stock and the firm’s spectrum rights were “worthless”. Kerrisdale also warned that Globalstar was heading for default on its loans. It subsequently transpired that Kerrisdale had been “shorting” the stock – essentially betting that the value of Globalstar’s stock would fall and then profiting by that fall. Globalstar issued a quick rebuttal to Kerrisdale’s claims but the stock fell 20% nevertheless.
Globalstar had previously applied to the Federal Communications Commission to have spectrum allocated to it, to enable it provide mobile satellite services augmenting current terrestrial Wi-Fi computer communications services. Its stock market price had previously risen in the hope that this would be granted.
Comment by David Todd: This was just a “betting coup” and it seems wrong that such things should be allowed. Nevertheless, there are many in the industry that found the survival of Globalstar one of the more surprising developments in the modern space business. The company was essentially shored up by a plan to build a new satellite constellation using loans backed by the French export credit agency Coface. The deal essentially detracted from Globalstar’s healthier competitors. Learning from Globalstar’s ingenuity, these competitors followed Globalstar and applied for similar state-backed cheap financing from Coface and other national export credit agencies. While such deals are good for national space industries in getting them new orders, and for the satellite operators themselves in getting cheap financing, the problem is that sooner or later one of these aided satellite operating firms will go bust – and it will be the export credit agencies and their national tax payers that will have to pick up the pieces.
