* LightSquared has talked to analysts, investors
* IPO filing could come as soon as summer
* Any IPO would help ease pressure on Falcone
By Matthew Goldstein and Svea Herbst-Bayliss
NEW YORK/BOSTON, April 11 Billionaire hedge
fund investor Philip Falcone may have found a way out of his
risky wireless telecom bet through a possible initial public
offering, three sources said.
LightSquared, the upstart telecom backed by Falcone's hedge
fund, could file for an IPO as early as this summer, said one
person familiar with the matter. It has been meeting with Wall
Street telecom analysts and institutional investors to discuss
its business plan.
A LightSquared spokeswoman declined to comment on the
matter, saying the company does not discuss "rumors."
Falcone has staked the future of his Harbinger Capital
Partners hedge fund on LightSquared, which is hoping to build a
nationwide high speed wireless communications network by 2015.
About half of Harbinger's $6 billion of capital has been
poured into LightSquared, and an initial public offering for
the company could be the beginning of Falcone's exit from the
investment. An IPO would be one way for Harbinger to cash-in
its significant equity stake and begin returning money to the
hedge fund's investors.
Just last week, LightSquared executives met in New York
with a telecom analyst from Morgan Stanley (MS.N) and
representatives from several mutual funds, said three analysts
familiar with the situation. The meetings were held at
LightSquared offices in Manhattan, located in the same building
as Harbinger. LightSquared is based in Reston, Virginia.
A Morgan Stanley spokeswoman declined to comment.
LightSquared, sources say, is trying to organize a similar
meeting with industry analysts and institutional investors on
the West Coast for sometime next month.
But some industry analysts said LightSquared would have
hard time going public without first reaching a deal with a
strategic telecom partner like Sprint (S.N) or Verizon
"They need some big contract to convince people that they
have an anchor tenant for this network," said independent
telecom analyst and consultant Tim Farrar. "Nothing they have
done so far comes close to demonstrating that."
BIG BET ON WIRELESS
Falcone's big bet on LightSquared has emerged as one of the
most daring and risky in the $1.9 trillion hedge fund industry.
Some of his hedge fund investors have told Reuters they have
grown increasingly uneasy as they wait for his telecom bet to
pay-off and watch the rest of his portfolio holdings perform
Falcone could be rescued by the red-hot IPO markets, where
investors have shown an appetite recently for big offerings
from companies loaded with debt. In March, for example,
hospital operator HCA Holdings Inc (HCA.N) sold some $4.4
billion of shares. The private equity-backed company has a
negative net worth as measured by the book value of its assets
Last year, Harbinger's flagship fund declined 12 percent
and this year the fund fell another 4 percent in the
first-quarter. Harbinger's lackluster performance in 2010 is
one reason Falcone fell-off AR magazine's list of the best-paid
hedge fund managers.
Industry analysts estimate that LightSquared, which took
out more than $1 billion in loans with the help of bankers from
UBS UBSN.VX and JPMorgan Chase (JPM.N), still needs to raise
at least an additional $6 billion to build-out its
Reuters previously has reported that bankers with UBS are
telling prospective investors and industry analysts that
LightSquared could be worth more than $10 billion when its
wireless network is built out, based on the demand of
high-speed Internet access.
LightSquared is trying to position itself as a low-cost
alternative to the big wireless operators like Verizon and AT&T
(T.N) , which recently proposed a $39 billion deal for Deutsche
Telekom's (DTEGn.DE) T-Mobile USA.
In March, LightSquared announced that Best Buy Co (BBY.N)
and Leap Wireless International LEAP.O agreed to purchase its
But Farrar and several other analysts who did not want to
be named said the deals with Best Buy and Leap Wireless are not
large enough for the company to consider going public.
(Reporting by Matthew Goldstein and Svea Herbst-Bayliss;
Editing by Tim Dobbyn)