Monday trade saw Intelsat S.A. (NYSE:I) shares go beyond the roof with a 25.16 percent rise after Japanese technology investor SoftBank revealed that it is concocting a possible merger between the communications satellite service provider and another major provider OneWeb LLC.
Originally, Intelsat was one of OneWebs minor investors during its $500 million investment round in June 2015 together with Airbus, The Coca-Cola Company, Hughes, and Virgin Galactic.
OneWeb’s major stakeholder SoftBank provided the satellite startup with $1 billion funding in December, comprising the majority of its oversubscribed financing round worth $1.2 billion.
According to sources that refused to be named, SoftBank has committed itself to paying off some portion of Intelsat’s huge debt-pile as a part of the deal.
The Intelsat-OneWeb merger is conditional on approval of Intelsat bondholders, with an accumulated debt of $15 billion at September 30, people familiar with the matter said. The company has exerted all efforts to cut on its debt most especially through bond exchanges.
The two companies’ combination would strengthen both key players in the satellite space, making it possible for Intelsat to take control of its pile of debt. Due to SoftBanks initiative to provide affordable internet service thru the use of satellites, it announced its investment in OneWeb late last year.
A portion of Intelsat’s debt was trading as low as $0.40 on Monday, according to a statistics provider.
The company’s last trading close at its 52-week and intraday high of $5.87, up a whopping 25.16 percent. The stock opened the trading day at its intraday low of $4.66. It has a 52-week low of $1.44. The company currently has a market capitalization of $552.48 million with an average volume of 420,552. It has a price to earnings ratio of 1.85 with earnings per share of 3.18.
Because of the sudden surge after 10 sessions of rallies and two sessions of loss, the company’s 14-day RSI is situated at 86.33 which is well above the overbought level as of the moment. The chart above suggests an upward trend for the stock.
Aurelius Capital Management, an Intelsat bondholder, made accusations the previous year about the company defaulting some of its debt and not fairly paying dividends.
Summed up, this joint venture, which will effectively provide OneWeb a stock market listing, has a valuation of $18 billion.
The new company would have Greg Wyler, OneWeb’s founder, as its executive chairman as Intelsat’s chief executive, Stephen Spengler, continues his role, bankers said.
OneWeb was the brainchild of a group of tech backers and entrepreneurs as an effort to provide internet access to areas around the world that the technological innovation hasn’t yet reached.
Luxembourg-based Intelsat is currently the world’s largest satellite services business, providing commercial satellite power to a number of military organizations, including the US government.
As SoftBank gets involved in such a merger, this further emphasizes the company’s status as one of the tech industry’s power broker. This is after the company pledged to raise a $100 billion fund—the largest capital pool—intended for the further advancement of technology.
Intelsat, OneWeb, and SoftBank did not give any statement yet about the news.
FSM News is an up-to-date news website about the movements in the stock market, financial sector and the global economy. Subscribe to FSM News to further educate yourself about the ins and outs of the financial realm because in finance, knowledge is power.