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Clearwire Corporation (CLWRD) Message Board

  • bjspokanimal bjspokanimal Nov 8, 2012 12:55 PM Flag

    What McCaw's "make whole" Agreement Tells Us

    McCaw sold his shares to sprint for just under $3 a share.

    It took a 3-year, "make whole" agreement to get him to do it... meaning that if a tender offer goes off for more than what he got for his shares, that he participates in the premium paid.

    What's important is that it TOOK a make-whole agreement to COMPEL McCaw to part with his shares. The implication is very clear... he WOULDN'T have sold his shares for a 40 to 50% premium above the market price WITHOUT the make-whole clause.

    It means that McCaw doesn't see the ~ $2.97 he got for his shares as a fair price on the face of it and that he needed a call option on the higher price that he actually wants for his shares.

    The fact that softbank required sprint to obtain 50% of Clearwire shares as a condition of softbank's acquisition of sprint reveals softbank's intentions. Efforts by Dan Hesse to downplay clearwire's value ring very hollow in light of softbank's actions, which speak WAY louder than Hesse's words.

    Meanwhile, clearwire's spectrum keeps appreciating faster than their annual rate of cash-burn...

    ... that's why major investors are amping up their demands that clearwire "monetize" some of their spectrum to showcase this company's true value.

    Spokanimal

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    • baggies !!!!!!

    • Anybody who ever thought softbank was targeting anything less than 100% control of clearwire's spectrum has their head up their....

    • Hey Spok,

      I'm long the stock and would appreciate your, or other sharp investors comments on...

      2 possible concerns?...

      (1) What are your thoughts relative to the M.t Kellet letter. Specifically, the concern that the Equityholders agreement expires Nov 2013, after which time Sprint would not need to get 75% agreement within the group to come to a buy-out price? Do you see Sprint/SB waiting it out and trying to scoop up CLWR on the cheap?

      (2) Only other concern I have is...could Sprint just buy out another strategic partner(s) thus achieving 75% control and come to agreement with themselves...or because the board seat reverts back to CLWR, if less than 100% purchase, is this scenario not a concern?

      Thanks for your thoughts.

      Good luck longs!

      • 1 Reply to tickertape01
      • The Equityholders' Agreement does not expire 11-28-2013, but the Standstill Agreement part of it does. The Standstill Ageement prohibits Sprint from acquiring common shares on the open market or through private transactions, outside of a strategic partner sale. But it allows the exception of a buyout of all shares by Sprint, where a majority of non-Sprint board members, and a majority of non-Sprint shareholders approve.

        Even if Sprint bought all the shares of the remaing strategic partners they would only have 63% of the voting rights. Prior to the 11-28-2013 a majority of the remaing 37% non-Sprint shareholders would have to approve a buyout. After 11-28-2013 the 75% approval of all outstanding shares would apply, so only about 1/3 of the remaining 37% would have to vote with Sprint. And after 11-28-2013 Sprint could buy up shares to get their total up to 75% before making a buyout offer.

        Clear as mud?

    • ... and I believe that THAT is the reason why activist shareholders are urging Clearwire to actively market their excess spectrum.

      McCaw agreed to sell his shares because softbank's financiers of the sprint acquisition REQUIRED sprint to own more than 50% of Clearwire. In the eyes of those fininciers, sprint wasn't WORTH what softbank was paying if it DIDN'T include clearwire.

      Although it's likely that softbank would like sprint to own ALL of clearwire, since, IMHO, that is their ultimate intention, Sprint could only do the McCaw deal for now because sprint needs ALL of their cash for Network Vision, Clearwire isn't going anywhere for now, and the rest of the cash sprint needs to FINISH buying clearwir won't arrive until the softbank deal is done.

      So between now and next summer, when sprint GETs it's cash and, IMO, buys clearwire... it's Hesse's job to do everything he can to lower expectations and the image of Clearwire so that it doesn't cost sprint more than necessary to do the tender offer....

      ... the activist shareholders' efforts to elevate CLWR stock via a spectrum sale or threat thereof is an effort to counter Hesse's goals of keeping CLWR at it's current, artificially-low value.

      For his part, McCaw ALSO wouldn't have signed off on his stock sale if Sprint hadn't given him some assurances that a sale of CLWR to sprint wouldn't be in his best interest as a shareholder. Not only would McCaw NOT sell his shares without the make-whole agreement.... but it's equally logical that he wouldn't have sold them if he wasn't given some kind of assurance from Hesse that the make-whole agreement wouldn't bear fruit for McCaw...

      ... because an out-of-the-money, make-whole agreement is worth the same as no make-whole agreement at ALL.

      Spok

    • It could be read differently, especially if you knew Craig's cost basis (which I do not). I assume it is much higher than $3 though. From that standpoint, I see it as Craig moving on with a bet that the spectrum speculation game will be resolved in 3 yrs, one way or another. He is a very smart guy and his opportunity costs are much higher than anyone on this board. Makes it much more important for him to avoid cognitive biases that all humans have.

    • After SB-S acquiring Comcast + BrightHouse + Intel shares for a special price this will put Sprint into a 63% majority ownership. It takes 75% of shareholders to approve Clearwire's change of ownership based on its charter.

      Legally there is nothing preventing S-SB from making a “tender offer” of $5 or more to only 12% of public shareholders just like it (SB) did with Sprint’s (only to 50% of S shareholders on tender offer).

      You know, the 12% on "tender offer" will be offered to institutions such as Credit Suisse and others. The remaining public may end up getting nothing and legally there is no merit for a challenge.

    • With CLWR trading at $2.20 and with a strike price of $2.97 with expiration in Nov. 2015, the options are still worth 86 cents each.

      Sentiment: Strong Buy

      • 1 Reply to wayne.vanscoyoc
      • Wayne,
        Thanks for the info on the option pricing site. That is good info.

        I would be careful about extrapolating McCaw's price, or the tender offer for that matter as the mkt price. Icahn usually gets a premium for his shares just cuz mgmt sometimes wants him out of the way. Still the tender offer should put a floor under the shares for now.

        If the larger holders see that they cannot inspire ATT or Vz into making a CLWR play, they may want to exit before S/SB deal is done. Should be interesting to watch.

    • c.wire@ymail.com c.wire Nov 8, 2012 2:48 PM Flag

      I think it is very telling that one of the most bearish analysts on Clearwire just upgraded the stock today and placed a $2.50 price target. His price target was $1.00 just weeks ago... The tide is turning on this stock and it's one event away (SB/S offer, monetization of spectrum, etc.) from much more upside... How anyone feels comfortable shorting this stock is beyond me. As evidenced in the 100% bump just weeks ago, you are playing with fire...

    • Good Info Spok, whats with the Pig dude! You steal his ole lady or something.

      Sentiment: Strong Buy

    • 1. He got $2/share

      2. That's more than you'll get, in the end game

      4. Softbank gave him a free call option. I don't see them offering that to you

      3. Oh wait, you don't have blocking rights when it comes to voting on corporate issues

      5. Still bagging?