At the start of this year, we wrote an Insider Weekends article about the satellite telecommunications company Globalstar (GSAT) after a series of purchases by Executive Chairman James Monroe III. The company had a market cap of around $4 billion, but it would always slip past our filters for the insiders section of our Daily Event Driven Monitor due to the stock always trading under $2 per share. However, when we took a closer look at the company we were absolutely fascinated by what we found – so we were quite interested when we saw Mr. Monroe purchase shares again last week.
For a quick overview of Globalstar’s business, this is what we stated in our January article:
Globalstar is a complex business. The company provides Mobile Satellite Services (“MSS”) including voice and data communications services as well as wholesale capacity services through its global satellite network. Globalstar primarily provides reliable connectivity in areas not served or underserved by terrestrial wireless and wireline networks and in circumstances where terrestrial networks are not operational due to natural or man-made disasters. Globalstar also has a number of other spectrum-based services, including a developing Internet of Things (“IoT”) data transmissions business that has a number of unique applications including horse tracking via Spotter and sheep tracking via Findmysheep.
A brief overview of Globalstar, taken from their most recent investor presentation.
Compared to other public satellite companies (including Echostar (SATS), another satellite communications company we’ve covered in an Insider Weekends article), Globalstar doesn’t look all that impressive. The company hasn’t been able to make a profit in years and is quite expensive with a TTM EV/Sales of 18.77 and TTM EV/EBITDA of 53.96. However, what stands out is Globalstar’s 50% revenue growth from fiscal 2022 to fiscal 2023, and more importantly, the reason behind that revenue growth.
The Apple Partnership
In September 2022, Apple announced that it had partnered with Globalstar to allow users to send emergency messages from remote locations, using Globalstar’s satellite network. Apple allocated $450 million from its advanced manufacturing fund toward satellite infrastructure to support the feature, with Globalstar receiving the majority of the funding. In return, Globalstar agreed to allocate 85% of its network capacity for Apple services.
In November 2024, Globalstar and Apple expanded their partnership. Apple agreed to invest $1.5 billion to fund a new constellation for expanded satellite services. $1.1 billion of the funding will be allocated to actually constructing the new satellite constellation, while $400 million is being exchanged for a 20% equity stake in a special purpose entity owned by Globalstar that will manage the constellation. In addition, Apple will also pay $232 million that Globalstar intends to use to pay down debt. Given that Globalstar currently has about $335.8 million in net debt (which, against a market cap of $4.17 billion doesn’t point to much leverage), the $232 million will go quite a way in bolstering the company’s balance sheet. A big chunk of this debt repayment is related to the company’s 13% senior notes, which should provide a nice boost to net income once they are retired.
The benefits to the partnership with Apple didn’t just stop there, Apple was also ultimately willing to bankroll CapEx for the company and we wrote the following about it:
The Apple developments aren’t the only exciting thing about Globalstar. Globalstar is already in the process of a constellation refresh, purchasing 17 satellites from Macdonald, Dettwiler and Associates Corporation (MDA), which are set to launch next year. When this $327 million order was announced, Globalstar explained that a “potential customer” (presumed to be Apple) approved the cost of the new satellites’ construction. Furthermore, the potential customer agreed to reimburse the company for 95% of the approved capital expenditures Globalstar would make in connection with the new satellites, interest costs of the company’s borrowings related to the new satellites, and any termination costs in the case that they arise. This deal works massively in Globalstar’s favor – they are getting reimbursed to update their satellite network, with a guaranteed customer and revenue at the end of it all. The new deal with Apple is expected to more than double revenue once the satellite systems are operational.
Reverse Split and Uplisting
There were a couple other parts to our Globalstar thesis. The stock was set to undergo a reverse split in order to improve marketability and liquidity (which they completed in a 1:15 reverse split) and was also set to uplist to the NASDAQ from the NYSE American (the old American Stock Exchange), which they completed on February 11 of this year.
An uplisting usually provides a nice tailwind but Globalstar’s stock is down 33% YTD. The most likely explanation is that since companies undergoing reverse splits usually face downward pressure, the uplisting tailwind didn’t help with liftoff. This drop probably encouraged Mr. Monroe to continue picking up shares this week.
James Monroe’s Insider Purchases
When we talked about Mr. Monroe in our last article, we noted that he was no stranger to Globalstar. He currently serves as the company’s Executive Chairman, and has done so since Thermo Capital Partners purchased the assets of Globalstar in April 2004. He was Globalstar’s CEO from January 2005 until July 2009 and reassumed that position from July 2011 until September 2018. Globalstar’s website includes this blurb about Thermo Capital Partners in their description of Mr. Monroe’s role at the company:
Mr. Monroe has been the majority owner of Thermo Companies since their founding in 1984. Mr. Monroe has overseen operations in a wide variety of businesses at all phases of growth from startup through maturity. Under his direction, Thermo Companies founded or acquired companies in diverse industries including power generation, natural gas exploration and production, industrial equipment distribution, real estate, telecommunications, financial services and leasing services.
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