Of the 11 debt issuances Bloomberg has listed for Clearwire, only three were trading meaningfully higher a bit earlier today when DISH equity was up 4%:
1. $2,027M of 12% Dec. 2015 bonds +6.250 to 105.750
2. $730M of 8.25% Dec. 2040 convertibles +4.681 to 99.095
3. $500M of 12% Dec. 2017 bonds +6.000 to 114.188
The problem is that even if DISH owned 100% of the $3.3B in debt cited above, the principal gain this morning would have been only about $191M, whereas the earlier 4% pop created an additional $605M in market capitalization.
Even if it is assumed that $200M of the $605M gain were attributable to beta (e.g., from above-consensus consumer spend numbers this morning), you'd still be shy by over $200M. I checked the holders of the three mentioned debt issuances, and they appear fairly widely held. DISH definitely does not own 100% of the paper, so the gap is much larger than $200M.
The debt holdings may be helping DISH equity, but it seems like only a small part of the story. Something else is going on.
Sprint Nextel Corp. doesn't have any immediate plans to buy Clearwire Corp., and shares in Clearwire fell sharply in early Tuesday trading.
Bloomberg reports that after Monday's announcement that Japanese telecommunications giant Softbank Corp. is buying 70 percent of Sprint for more than $20 billion, the two companies are going to focus on completing the deal.
Shares in Kirkland-based Clearwire (NASDAQ: CLWR) fell more than 18 percent in early Tuesday trading to $2.18 after rising from $1.30 just a few days ago.
I guess that takes the CLWR debt off the table........
Let's say you're the head of Corp. Dev. at Sprint. Softbank's $8B capital injection that will appear in your Treasury group's coffers (several months from now?) is already burning a hole in your pocket, and you're looking around for spectrum to build out at least halfway competitive 4G services.
Do you approach Clearwire, which you can bend over a barrel in negotiations, or do you approach DISH, which has no urgent need to do anything it doesn't want to do? I'd first try the former.
But perhaps this has already occurred and resulted in failure / impasse because of Clearwire's dogmatically sticking with WiMax and TD-LTE, both of which Sprint may not want to bet the farm on. I guess that would make DISH spectrum an alternative... but it seems like a stretch, at some indeterminate point in the future.
Dunno. I'm now wavering and thinking this run-up may be more of a short opportunity than a case for further gains.