The board of directors of Globalstar is considering carrying out a reverse stock split in order to comply with Nasdaq listing rules that require a minimum bid price of US$1 per share.
Globalstar’s share price has remained below the US$1 mark for over…
The board of directors of Globalstar is considering carrying out a reverse stock split in order to comply with Nasdaq listing rules that require a minimum bid price of US$1 per share.
Globalstar’s share price has remained below the US$1 mark for over a year and on 12 September 2011 the company received a letter from the stock exchange informing it that it had breached listing rules. Nasdaq gave Globalstar a grace period of 180 days, or until 12 March, to regain compliance and after failing to achieve this, Globalstar was given a further extension of 180 days, until 7 September 2012.
At close on 6 September, the satellite operator’s stock price was trading at US$0.30 and on 12 September, Globalstar received delisting notice from Nasdaq stating that unless the company requests an appeal, trading of its stock will be suspended on 20 September and Globalstar will subsequently be delisted.
Globalstar has stated that it intends to appeal and has submitted a filing outlining a plan for a potential reverse stock split in order to remain listed.
The company stated: “The Board believes it may be in the best interests of the company and its stockholders to effect the reverse stock split, which would have the result of increasing the market price of the common stock so that we are able to regain compliance with the minimum bid price rule.”
The Globalstar board has until 31 December 2012 to carry out this transaction and is currently weighing up the ratio of any split. As of 30 June 2012, Globalstar had approximately 408.4 million shares of outstanding common stock. If the company undertook a 1-for-20 split the number of shares outstanding would be 20.4 million while if it undertook a 1-for-5 split there would be 81.7 million shares.
Globalstar’s controlling shareholder is its chairman and CEO Jay Monroe with a 69.9% stake, its next largest shareholders are a series of funds comprising Whitebox Advisors (8.2%), Steelhead Partners (6.2%), Stark Offshore Management (6.2%) and Columbia Wanger Asset Management (5.6%).
Settles Arianespace dispute and orders a further six satellites from Thales
Globalstar has revealed that it has entered into an agreement with launch service provider Arianespace regarding the additional amounts that the satellite operator will pay to cover costs associated with the delays experienced during three prior launch campaigns.
The resolution permits Globalstar and Arianespace to complete the fourth and final launch under their current launch services agreement. To that end, the final six satellites are anticipated to be launched by an Ariane Soyuz rocket in early 2013.
The issue arose after Arianespace flagged a missed contract payment by Globalstar in early August. If the MSS operator failed to make the payment in full by late August, Arianespace was entitled to suspend the fourth launch. It would also have amounted to an event of default under the US$586.3m Coface-backed loan facility agreement.
Meanwhile, Globalstar has also signed a contract for the manufacture and delivery of six additional second generation satellites from Thales Alenia Space.
The order is the result of the two companies settling their dispute over the mobile satellite operator’s option to acquire up to 23 second-generation satellites in addition to the 25 satellites already purchased.
Globalstar originally announced the order for the additional six satellites back on 3 October 2011 only for Thales to reject it claiming that the contract for the second batch of satellites had already been terminated and therefore a new agreement would have to be struck.
The pair both filed demands for arbitration and in May 2012, the arbitration court ruled in favour of the satellite manufacturer requiring Globalstar to pay around €53m in contract termination charges.
With Globalstar missing its 9 June deadline to pay these charges, the two companies entered into discussions to seek a mutually agreeable solution. On 26 June, the companies announced that they had come to a settlement and that Thales would complete work on the remaining four satellites and begin construction on the six additional spacecraft.
The new satellites, which will be technically identical to the next generation spacecraft, are expected to be delivered and launched in 2015. The new contract also provides Globalstar an option to order as many as twenty-four more satellites in the future.
The aggregate purchase price of the six spacecraft is €149.9m, payable over 34 months after the first payment. Globalstar said that it would utilize approximately €12m in long lead items purchased by the company under the previous agreement.
Any obligations under the contract will not come into effect until Globalstar has obtained financing for at least 85% of the total contract price. Globalstar stated that it expects to complete this financing by year end.
A spokesman said the company was considering a number of options for the financing, which could include a combination of senior debt and equity/subordinated debt. Depending on market conditions, it could raise more than the €150m required to finance 85% of the contract.
Jay Monroe said: “Once again we would like to thank Thales and the French bank group for their hard work and look forward to continuing our work with them as we move forward with the manufacture and delivery of the additional satellites.”
