Do Clearwire Shares Still Have Value?

| About: Sprint Corporation (S)

Clearwire Corporation (CLWR) is currently trading at $3.22, with two deals on the table. The two options are as follows: either a buyout from Sprint Nextel Corporation (NYSE:S) for $2.97 a share, or a buyout from Dish Network Corporation (NASDAQ:DISH) at $3.30 a share. So how should one be trading the stock?

Clearwire said in a proxy filing this week that it has not decided to officially change its recommendation to accept Sprint's offer, and it is still negotiating with both Sprint Nextel Corporation and DISH Network Corp. for a buyout deal.

Which Buyout Deal Will Win?

At this point, Sprint owns more than half of Clearwire and is trying to purchase the rest of the company. Softbank Corp (OTCPK:SFTBF), the Asian company that's in the process of buying 70 percent of Sprint, capped Sprint's offer for Clearwire at $2.97 per share. Further, Sprint and Clearwire reportedly made a deal as of December 13, 2012, and Sprint argues that since it owns the majority of Clearwire, the deal is secure.

However, Dish pointed out in its letter, dated January 16th, that the deal for Sprint to buy Clearwire is contingent on the deal between Sprint and Softbank going through, because Sprint needs the cash it would get from Softbank to buy Clearwire.

Shareholder Response

Shareholders currently say they will vote against the deal between the company and Sprint. ValueWalk has reported that Glenview Capital Management has indicated it will reject the $2.97 per share bid Sprint has made for Clearwire. Further, minority shareholder Taran Asset Management plans to file a complaint with the FCC that says that Clearwire Corporation is worth more than the amount Sprint has bid for it.

Additionally, two weeks ago, Mount Kellett Capital Management LP, which owns 7.7 percent of Clearwire's Class A shares -- the second-biggest minority stake -- sent a letter to Clearwire's board asking them to consider Dish's bid. The firm continued to express its concerns about Clearwire's board, stating that the Special Committee is in breach of its fiduciary duties to the minority stockholders of Clearwire on several accounts. First, it capitulated to Sprint's demand to sell the company at a grossly inadequate price. Second, it failed to conduct a vigorous process for the monetization of the company's excess spectrum. Lastly, it failed to explore other financing alternatives available to the company, instead accepting a highly convertible debt financing from Sprint.

Sprint responded to shareholders by arguing that its bid is better because it's simpler and carries fewer conditions, and that the matter is in the hands of the Clearwire special committee, which has accepted Sprint's offer.


Shares have been trading in the $2.97-$3.30 range since January 8th, even spiking to $3.40 at one point on excitement. Investors should note this range and take the accepted $2.97 as a potential maximum loss. On the other hand, there is upside if the deal does not go through with Sprint. At that point, Clearwire can either sell off at a premium of $3.30, which it has already been offered, or it could continue operations on its own and achieve the realized value both Sprint and Dish see in the company, which I discussed in my previous article, Clearwire's Story Is Anything But Clear. If the stock drops below $3.15 in the next few trading days, I intend to purchase shares.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CLWR over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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