Global Crossing: Forgotten Wall Street Darling Now a Basement Bargain

Global Crossing (GLBC) is one monopoly play that has been long forgotten.

If you had a choice, wouldn't you invest in a company that is almost a pure monopoly? A company that owns it all? A company that doesn't have a real competitor in it's core offering? Of course you would. It's called a monopoly play!

But, if it's a monopoly and if it's such a good play, why then does it trade at the rock-bottom prices? Why is its market cap in the basement? Why is the average daily trading volume equal to some no-name small caps?

There are few reasons why Global Crossing is in the situation in which it is right now. GLBC was once the Wall Street darling. When everything was shining, and when stock markets over-reflected the global economies of the last years of the century, Global Crossing was reaping benefits and was one of the most beloved companies in the world. Its business was simply a gold mine and its prospects were enormous: it was the sole owner of the world's internet and fiber-optic cable-bahn. Internet was the next revolutionary intelligence with infinite potential, and Global Crossing owned its global backbone. It was the only company that laid and owned all the high-speed fiber optic cables that connected the continents. It was a time of paradise for the Global Crossing shareholders. They owned a monopoly. Global Crossing was one of the most beloved darlings on Wall Street.

And then everything changed. Fast-forward to the dot-com crash of 2000-2002. Venture capital investments started dropping immediately, borrowers defaulted, bond-markets froze, and stock market started to tumble, first slowly, and then, after September 11, it dropped down very fast, just like the falling comet. Companies started disappearing left and right, and the party quickly came to an end. Prospects disappeared, analysts changed their tune, and the internet became a commodity. Global Crossing suddenly couldn't find the use for many of its cable-bahns, and its business overexpansion resulted in the bankruptcy filing. The company quickly became one of the most hated companies on the stock market as its shareholders watched in horror as their share prices vanished from above $100 per share to pennies. That was quickly followed with lawsuits, bankruptcies, and everything you can imagine. The time of Global Crossing, then trading under the stocker ticker GX, was over.

But is it still?

After bankruptcy, no one heard of it for a long time. Everything went silent. The global economy was licking its wounds and trying to overcome various diseases in terms of scandals, arrests, illegalities, wars, disasters. As the economy started to recover, Global Crossing began to regain its strength. It emerged from bankruptcy just in time for the economy to heat up again. It recovered gloriously, ready to shine again. But it never did. A few investors got in, but, for the most part, the company was no longer interesting to Wall Street. Wall Street was into commodities, investing everything and their mothers in gold, oil, silver, copper, corn, etc. After GLBC's new, post-bankruptcy IPO, larger volumes initially started drying up, and the company started losing investors' interest. That brings us to Global Crossing today.

Global Crossing went from being the most beloved to the most hated to the forgotten. But should it be forgotten? Absolutely not. Nothing has changed, really. Those Ethernet cables, needed so much for the global expansion and continued rise of the artificial intelligence, are still securely laying on the bottom of all oceans, connecting continents and offering uninterrupted data transfer, downloads, and uploads. The best part: these cables are extremely underutilized. As Global Crossing was over-expanding, it kept installing cables with much more capacity than needed at that time, as it over-anticipated the internet era boom. It didn't happen as fast as they predicted, but it is surely happening right now, and is with us to stay. Those cables are ready to accept massive explosion of data as their bandwidths are patiently waiting under the seas. The best part? Global Crossing still owns these cables.

Global Crossing is still the only global backbone and offers enormous potential. Global Crossing is still a monopoly. Those cables are still there. They are not going away. Prospects are still there, stronger than ever. But, this time, Wall Street forgot about it. Wall Street forgot to look back at the tech bubble darlings. Wall Street found some other bubbles to burst now.

That is the best time: Global Crossing, an information age monopoly, at the rock bottom prices, a company that will track and actually offer the growth of the Internet and electronic age, a company that will either rise like Phoenix or potentially be swallowed by the growth-hungry network companies, such as Level(3) for example, that need those backbones to continue extending their leads. Combining its existing cable infrastructure with recent wireless and satellite partnerships, Global Crossing is in a whole new ball game: moving the wired and wireless networks to the biggest backbone in the world! Can GLBC deliver again?

Disclosure: Author has a long position in GLBC

Comments

[inishmor:]

What a load of patent rubbish. GLBC has never never made a penny. It has eaten though over $20 billion dollars of investor capital building it's network and it still cannot make money. There is still 10 years later far to much supply and pricing is so bad they still cannot make money. Even worse all the money the spend in 1998-2001 in lighting their fibre is now old and needs to be replaced. They have no competitive advantage over the other suppliers.

The management team in GLBC are shifty at best. The previous management were criminal. My advice is to stay away. They are up to there eyeballs in debt and a decade later still cannot make a penny. Just burn other peoples money while they sit there cashing huge paychecks.

2007 Sep 06 01:40 PM

[Beris:]

I agree that the business has not been shining for GX in the past, and they have been severely punished for that. Rightfully so. However, I believe that the times are changing and the worse of GX is over. At this level, I believe that GLBC is a bargain, as turnaround might just be starting. Although this is a speculative play, I believe that the risk/reward ratio is definitely on a side of reward here...by large. Just my thoughts

2007 Sep 11 09:14 AM

[User 106536:]

This story leaves out alot of the "why" in how they overbuilt. It is worth nothing that Global Crossing was at the forefront of scandalous methods to manipulate their quarterly reports. They did not just "overbuild" capacity, they were a cause (and symptom) of the overbuilding and overinvestment frenzy. Its amazing they escaped the fate of more well known enron executives. The problem with investing in this company is that you dont know if you are investing in the fibre (which is truely valuable) or the management. They've already shown the capacity (no pun intended) to defraud investors for their 1st buildout, they are not to be trusted.

2007 Sep 11 06:00 PM