Straight Path settles U.S. license investigation, shares jump

(Adds stock jump, FCC comment)

By Liana B. Baker

SAN FRANCISCO, Jan 12 (Reuters) - Straight Path Communications Inc said on Thursday it would pay $15 million to settle a federal probe into claims that the wireless spectrum owner had submitted false data to renew airwave licenses, sparking a 34 percent rally in its stock.

The airwaves can be used for emerging 5G wireless technology, which service providers such as AT&T Inc and Verizon Communications Inc are seeking to expand their networks.

As part of the settlement, Straight Path will pay $15 million to the U.S. Federal Communications Commission and give the Treasury Department a 20 percent cut of any sale of its licenses, the company said in a statement.

The commission investigated Straight Path's former parent IDT Corp and its spectrum licenses following allegations of fraud in November 2015 by an anonymous short seller of the company's stock. Short sellers borrow securities to sell in the belief that they can buy back them back later at a lower price.

The short seller claimed that Straight Path managed to renew its 39 GHz band licenses by incorrectly saying in its filings that it had constructed systems that were never built.

Short sellers such as New York-based Kerrisdale, a $400 million hedge fund, announced in late 2015 they were targeting Straight Path's stock, leading to wild swings from $50 to less than $8 over several months.

The stock rose $10.84 to $42.25 at mid-afternoon on Thursday.

Under the settlement, if Straight Path does not announce the sale of its spectrum licenses in the next 12 months, it will have to pay the FCC $85 million or return its licenses. It also agreed to surrender 196 of its 1,000 licenses in the 39 GHz band.

Travis LeBlanc, chief of the FCC's Enforcement Bureau, said in a statement that "squatting on spectrum licenses" was "fundamentally inconsistent with the public good."

In July 2016, the FCC made a rule change that allowed for the 28GHz and 39GHz bands, a major part of Straight Path's spectrum holdings, to be used in mobile communications.

Straight Path also said on Thursday that it was hiring investment bank Evercore Partners Inc to help the company explore strategic alternatives, including a sale of its assets.

(Reporting by Liana B. Baker in San Francisco; Editing by Gopakumar Warrier and Richard Chang)