What Happened?
Shares of satellite communications company EchoStar (NASDAQGS:SATS) jumped 1.1% in the morning session after the Federal Communications Commission (FCC) officially closed its investigation into the company's 5G service obligations following a major spectrum deal with SpaceX. This move extends significant gains from the previous day when the stock soared upon announcing the sale of its AWS-4 and H-block wireless spectrum licenses to Elon Musk's SpaceX for approximately $17 billion. The deal provides a major boost to EchoStar's balance sheet, as it includes up to $8.5 billion in cash, $8.5 billion in SpaceX stock, and funding for about $2 billion of EchoStar's debt interest payments. The FCC's decision to terminate its review, a direct result of the divestiture, removes a key regulatory uncertainty for the company, further fueling positive investor sentiment.
After the initial pop the shares cooled down to $82.14, up 1.8% from previous close.
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What Is The Market Telling Us
EchoStar’s shares are extremely volatile and have had 40 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was about 21 hours ago when the stock gained 17.4% on the news that the company announced a significant deal to sell wireless spectrum licenses to SpaceX for approximately $17 billion. The agreement involves SpaceX paying up to $8.5 billion in cash and issuing up to $8.5 billion in its own stock to EchoStar. Furthermore, the deal provides EchoStar with substantial financial relief, as SpaceX will cover approximately $2 billion in interest payments on EchoStar's debt through November 2027, a move that significantly bolsters the company's balance sheet. In addition to the asset sale, the two companies will enter a long-term commercial agreement, allowing EchoStar's Boost Mobile subscribers to access SpaceX's next-generation Starlink Direct-to-Cell satellite service.
EchoStar is up 261% since the beginning of the year, and at $82.14 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 $2,930.
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