Intelsat S.A. (fka INTEQ)

[zc182]

Welcome to the board. Thoughtful conversation is definitely a plus on the board, so I know most of us will appreciate real tough questions so that we can discuss the reality of our investments here.

If you will notice the recent price action between 2018 and today in Feb. 2020 , it was all caused by speculation that a private auction could potentially have a windfall payment of around 20 billion going directly to Intelsat. Which would make them debt free and an added 6 Billion cash in hand. Obvious by now, this is not what is happening.

A price high of over $37 was had during this time. 10x of our current position. Some fuzzy logic might say that since Intelsat is going to receive around 5 Billion of a windfall (Plus new equipment, 3 or so American Made Satellites) that we should be able to reach a high of around 25% of the price when the windfall was 20 Billion. Which is a high price of around $9.25 , but we know that this is not how the markets work.

All this to say that regarding financial fundamentals, there isn't much to wonder about. Intelsat is in a strained industry, making less income than ever, has a whole lot of debt, the worst of which is rated at basically an F by Moody's. However, enter an upwards of 5 billion dollar (maybe 10? big difference) windfall, some free new equipment, some free advertising through the 5G shuffle, and if you check their website, some new (exciting?) services that could set them apart. What do you have?

At bottom line, a stock that is worth more than $3.75? Proba-possibly.

Two interesting things. Their weakest bonds that are being traded now, the C- ones, getting paid off through the windfall? At a discount? Already repurchased with other debt? Hmm.

Also, One Billion shares for sale? Yes, please. Regarding current buyers at $3 - $8 this is great news. Will the company not attempt to maximize price for what is essentially IPO 2.0 ? Let's say they want to sell those 1 Billion shares for between $10 and the recent high of $37, that is a big cash infusion, 20 billion? So now you take a price that is whipped between $10 and $37? ($10 to $100-200?) The dilution will mean that the current 140 million shares is about 12.5% of the eventual 1B1.4M . If we can assume that the similar windfall of 20 billion dollars can be had through dilution, then I will take the price of $20 and 12.5% of that is, $2.50 per share. However, that is strictly a financials based number. If we can garner some excitement by pushing the recent, 'We have NASA sensors on our satellite'. 'Boeing makes our stuff'. Then what we have is a debt free company with lots of shares in issue, with a somewhat new fleet, still with a larger footprint than most other providers. Call it $15 when the dust settles.