Gilat Satellite Networks Ltd (GILT)

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Gilat under pressure

Another company to feel the heat from the hedge funds when it published its results last Thursday was Gilat Satellite Networks Ltd. (Nasdaq: GILT; TASE: GILT), although in its case, the position was not short but the reverse. Gilat is currently making headlines, and has been climbing strongly following rumors that it could soon be sold, although this will be precious little help to a hedge fund from Boston called Sowood Capital. It made a smart move when it picked up 6% of Gilat, 2.44 million shares, at the end of 2006 and the beginning of 2007, and it should have earned a tidy profit from the company's recent results, and from what is shaping up as a battle to acquire control of it. Sowood reached the end of the road two weeks ago, after losing $1.5 billion in July, 50% of its value.

Sowood was founded by Jeff Larson, a well-regarded investment manager, who previously worked at Harvard University's investment arm Harvard Management Co. where he managed the institution's foreign equity investments. He managed, over the years, to deliver very good returns on the university's funds, but his mismanagement of his own fund resulted in it being swiftly wiped out. He transferred its remaining investments, including the Gilat shares that he didn't get around to selling when Sowood crashed in July, to a larger and better known fund in Chicago called Citadel, which duly announced at the beginning of this month that it was now a party at interest in Gilat with 2.1 million shares.

It now appears that the southbound pressure on Gilat's stock in recent weeks was due solely to the sale of 700,000 shares by Sowood alone, since Citadel already held 400,000 shares of its own. Last Thursday, when Gilat unveiled its second quarter results, Citadel capitalized on the investors' excitement at the company's excellent results, and sold a large part of its holding, sending the stock down slightly, but on a large volume of 1.3 million shares.

Published by Globes [online], Israel business news - www.globes.co.il - on August 14, 2007

http://www.globes.co.il/serveEN/globes/docView.asp?did=1000243443&fid=1176