Globalstar, Inc.’s stock skyrocketed 15% Monday morning on buyout speculation after AT&T (T – Free Report) purchased Straight Path Communications for a 162% premium. Globalstar’s fun in the sun faded quickly after the initial wave of takeover speculation died down, but a buyout could still be on the horizon.
The struggling satellite phone maker looked poised for a massive Monday after AT&T bought fellow communications company Straight Path for $1.6 billion. As is often the case, investors began to buy Globalstar stock in the hopes that Verizon Communications Inc. (VZ – Free Report) , T-Mobile US, Inc. (TMUS – Free Report) , or another cell phone giant might buy the company in order match AT&T’s new acquisition.
Globalstar’s stock was up 2.16% to $1.65 per share in Monday morning trading.
Globalstar’s major Monday push might have ended earlier than expected, but its stock has the potential for future gains, as a buyout is still very possible based on the company’s relatively niche offerings.
Niche Market
The company provides mobile voice and data communications services via satellite throughout the world. Globalstar’s clients include massively important industries such as oil and gas, government, military, transportation, and emergency preparedness. The company does not face extreme competition, as its bread and butter is out of reach of traditional wireless network clients.
Still, Globalstar saw its stock price fall drastically last June when news surfaced that the Federal Communications Commission wouldn’t vote on its plan to pair licensed and unlicensed spectrum to create its new Terrestrial Low Power Service network. Globalstar’s stock then popped in December after the company addressed the FCC’s major concerns in a new proposal.
Globalstar all but abandoned its plans to try toease Wi-Fi congestion in densely populated urban areas when it halted its efforts to pair licensed and unlicensed spectrum in January. Instead, the company pivoted to create an LTE service.
Shares of the Covington, Louisiana-based company gained 13.29% in March, but the stock is up just 2.53% since the beginning of the year. Before that, Globalstar’s stock price had dropped steadily over the last three years, after trading at an all-time high of $4.46 per share in June 2014. The sinking price meant investors were dying for Globalstar to bring something new to the table.
Last Friday, the company made a small, but potentially significant play in order to do just that.
Globalstar announced the launch of its new satellite industry compression service. The company will offer its compression services, which were developed by Yippy, Inc. , to its existing clients, as well as other players in both the Mobile Satellite Services and Fixed Satellite Services industries. The move will increase internet speeds for Globalstar customers and allow them to access and download important data and information much faster than before.
Some Globalstar satellite clients can expect to see wait times to load online content decrease from minutes to seconds. The compression industry is likely to grow as the amount of data stored on the web increases exponentially, and Globalstar has positioned itself well by partnering with compression technology leader Yippy.
“The rollout of this effort has been a major initiative for our satellite operations teams and last year we provided the service on a trial basis,” Globalstar CEO Jay Monroe said in a press release. “After months of rigorous testing, we have concluded that Yippy’s platform provides subscribers with a greatly enhanced data service experience. Additionally, we believe that the technology can be used by operators throughout the satellite industry and we look forward to working with other providers to integrate this technology into their platforms.”
Globalstar’s push into the compression market could prove to be viable as the compression industry grows. The move could also help increase the company’s buyout chances.
Furthermore, the company’s satellite phones and remote internet connection services are still in high demand from the U.S. military as well as others such as major shipping companies, oil giants, and disaster relief organizations.
AT&T paid a premium for Straight Path in order to bolster its 5G capabilities. But with a $248 billion market cap, AT&T could be looking for additional small acquisitions in the near future.
A buyout is still very possible for Globalstar as any deal would be relatively affordable for Verizon, AT&T, or another player, especially when considering it would uniquely expand the business offerings of any of the industry giants.
Article written by Benjamin Rains of Zacks
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