Telecom mogul Charlie Ergen successfully navigated EchoStar, burdened with debt, away from financial crisis.
In a series of significant transactions, satellite communications company EchoStar, founded by Charlie Ergen, has seen its market capitalisation soar from a few billion dollars to an impressive $25 billion in less than two years.
The journey began in June, when Ergen met with President Trump in the Oval Office to discuss EchoStar's situation. This was followed by a major move in late August, when EchoStar sold $23 billion of its coveted spectrum to telecommunications giant AT&T.
The spectrum, highly sought after by SpaceX, was later acquired by the Elon Musk-led company as part of its efforts to commercialise its Starlink internet service. SpaceX agreed to pay for the wireless communications spectrum previously belonging to EchoStar, a deal worth $19 billion.
EchoStar's stock price has risen dramatically as a result of these transactions. Shares jumped 70% following the sale to AT&T and again after the SpaceX transaction. The stock price, which was $10 per share two years ago, is now over $80 last week.
Ergen's personal stake in EchoStar has also seen a significant increase. His stake, which was just over $1 billion, has soared to over $10 billion with the share price rally.
The companies' transactions have been profitable not just for EchoStar, but also for several distressed debt hedge funds. Darsana, Redwood, and Silver Point Capital have made hundreds of millions of dollars in paper profits from EchoStar's transactions.
However, EchoStar's past struggles are not forgotten. The company had twice dodged bankruptcy in the past 20 months. One of its acquisitions, Boost, which was acquired from T-Mobile, had only attracted a few million customers by this year.
In an unexpected turn of events, Ergen has abandoned his audacious, decades-long quest to build his own mobile phone network. Instead, he has used the proceeds from the spectrum sales to refocus on his long-term dream of creating a national cell phone network.
The FCC, under the leadership of Brendan Carr, has initiated a review of EchoStar's compliance with its federal obligations to provide 5G service. This comes after Elon Musk's SpaceX had been critical of EchoStar's use of spectrum and sent a letter to the FCC expressing these concerns.
Despite these challenges, Ergen remains optimistic about his mobile phone ambitions. He believes that a standalone EchoStar would have created more value for shareholders in the long term. An outstanding lawsuit against EchoStar accusing Ergen of improperly stripping bondholder collateral is likely to be withdrawn or settled due to the share price moves.
The future of EchoStar, under the leadership of Ergen, looks promising as it navigates the complex world of telecommunications and space technology.
