October 6, 2014 / 10:16 PM / 5 years ago

Kerrisdale's Adrangi sends Globalstar reeling with new short bet

BOSTON, Oct 6 (Reuters) - Sahm Adrangi, who runs small hedge fund Kerrisdale Capital, told Wall Street on Monday he believes satellite communications company Globalstar Inc’s business is worthless, sending its stock tumbling roughly 25 percent.

Renting out the same mid-town Manhattan auditorium where prominent activist investor William Ackman has unveiled some of his biggest bets, Adrangi spent hours making the case against Covington, Louisiana-based Globalstar.

“Globalstar’s equity is worthless. It is not worth $4 billion, or $3 billion, or $1 billion. It is worth nothing,” Adrangi wrote in his 67 page presentation.

As speculation picked up last week that Globalstar was the target of Adrangi’s latest research, the company’s stock - a winner for much of the year - lost ground.

The stock closed at $3.01 on Friday. On Monday, the decline accelerated, with the stock ending at $2.26 a share.

The stock is widely owned by hedge funds, including York Capital Management, Litespeed Management, D.E. Shaw & Co, Soros Fund Management and Millennium Management, according to regulatory filings.

Monday’s drop made an already difficult month worse for many hedge funds. Last week, funds, including Perry Capital, lost big when a federal judge upheld the U.S. government’s right to seize the profits of mortgage finance companies Fannie Mae and Freddie Mac.

Adrangi said Globalstar has generated hype in the market with a plan to “exploit its spectrum licenses terrestrially,” but added that the company’s “TLPS (Terrestrial Low Power Service) concept is nothing more than the addition of one new Wi-Fi channel in the legacy 2.4GHz band - a licensed, for-profit channel that only authorized devices could use.”

Globalstar, which emerged from bankruptcy 10 years ago and rose 58 percent over the last 52 weeks, did not immediately have a response to the comments.

While Kerrisdale is a relatively small hedge fund with only about $300 million in assets under management, Adrangi’s following on social media and on Wall Street is relatively large.

“I think we proved today that the company is worthless,” he said in a telephone interview after the market close.

Calling it his “best idea ever,” Adrangi said he modeled much of Monday’s presentation on Ackman’s play book when he made a $1 billion bet against Herbalife in December 2012.

Adrangi, however, declined to say how big his short position against Globalstar was. (Reporting by Svea Herbst-Bayliss. Editing by Andre Grenon)

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