What Happened?
Shares of satellite communications company EchoStar (NASDAQGS:SATS) jumped 78.2% in the morning session after the company announced a definitive agreement to sell certain spectrum licenses to AT&T for approximately $23 billion.
The all-cash transaction involves 50 MHz of EchoStar's nationwide 3.45 GHz and 600 MHz spectrum licenses. This move provides a significant capital injection for the company, which plans to use the proceeds to retire debt and fund its operations and growth. The deal is also part of EchoStar's ongoing efforts to resolve inquiries from the Federal Communications Commission (FCC). In addition to the sale, the two companies amended their network services agreement, establishing a hybrid mobile network operator (MNO) relationship. This arrangement allows EchoStar’s Boost Mobile wireless service to continue operating on AT&T’s network, solidifying their strategic partnership.
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What Is The Market Telling Us
EchoStar’s shares are extremely volatile and have had 35 moves greater than 5% over the last year. But moves this big are rare even for EchoStar and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 4 days ago when the stock gained 6.8% on the news that the major indices rebounded, as Fed Chair Jerome Powell delivered dovish remarks at the much-awaited Jackson Hole symposium.
Powell suggested that with inflation risks moderating and unemployment remaining low, the Federal Reserve might consider a shift in its monetary policy stance, including potential interest rate cuts. This outlook eased market concerns about prolonged high interest rates and their impact on economic growth. The prospect of lower borrowing costs bolstered investor confidence, particularly in sectors that have lagged, leading to a broad rally across the market.
EchoStar is up 133% since the beginning of the year, and at $52.93 per share, has set a new 52-week high. Investors who bought $1,000 worth of EchoStar’s shares 5 years ago would now be looking at an investment worth $1,786.
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