Intelsat SA (NYSE: I) shares tanked another 20% on Tuesday after Federal Communications Commission Chairman Ajit Pai publicly declared his support for Congress to hold public auctions for Intelsat’s C-Band spectrum. Intelsat and other spectrum holders have been pushing to hold a private auction for their spectrum, which would potentially take place much sooner than a public alternative.
The proposed Senate bill would require sellers to turn over at least 50% of the proceeds from the spectrum sale to the FCC. As a result of the FCC decision, Intelsat’s stock is down 50% in the past two days, and Wall Street analysts see a messy road ahead.
See Also: Intelsat's Stock Slide Continues
Intelsat Analysts Weigh In
Raymond James analyst Ric Prentiss said Tuesday the 50% FCC rake is surprisingly high.
“Even we were surprised by the at least 50% of gross rake required in the proposed Senate bill, and think we may be headed to litigation that will delay the deployment of the C Band spectrum,” Prentiss wrote in a note.
Pai said the spectrum auction would begin by the end of 2020, but potential litigation would cloud the picture even further for investors, potentially pressuring Intelsat’s share price further as the uncertainty drags on.
In light of the FCC decision, Pretiss reiterated his Market Perform rating for Intelsat.
JPMorgan analyst Philip Cusick also reiterated his Neutral rating for Intelsat, but dropped his price target nearly 60% from $22 to $9 due to the uncertain timing of the auction.
JPMorgan recently estimated the value of Intelsat’s spectrum at $8 billion. If the company is eventually able to monetize its assets at $8 billion and turn over half of those proceeds to the FCC, it would still leave $4 billion in proceeds for a company with just an $812 million market cap.
Intelsat's stock traded around $6.58 per share at time of publication. Shares traded north of $20 as recently as Nov. 12.
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