Penny Stock Trading
Is there anything more rewarding than finding an overlooked penny stock that appears as though it’s ready to take off? Especially at a time when the markets are at record levels and stock valuations are widely seen to be significantly overvalued. For many investors, penny stock trading may be one of the last places to find equities with tremendous upside potential in 2017.
There is one penny stock that I have been watching closely for the last year. A penny stock that had a foothold in a niche market, but also had its share price slashed after uncertainty about the acceptance of its flagship product. All of those concerns appear to be in the rear-view mirror, and this penny stock’s share price looks like it is going to soar.
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Globalstar, Inc.
Globalstar, Inc. (NYSEMKT:GSAT) is a satellite communications provider whose time has come, though the company has taken a circuitous route to get to where it needs to be.
The company is a leading provider of mobile satellite voice and data services that serve remote areas underserved by traditional phone service.
Its Low Earth Orbiting (LEO) satellites act like bent-pipes or mirrors in the sky, picking up signals from over 80% of the Earth’s surface. That includes everywhere outside the extreme polar regions and some mid-ocean regions. (Source: “How Globalstar Works,” Globalstar, Inc., last accessed January 31, 2017.)
That makes Globalstar’s phones the perfect mobile devices for emergency response, business conducted in remote areas (villages, ships, industrial, logging, oil and gas, aviation), and commercial sites.
The company’s products include mobile and fixed satellite telephones, simplex and duplex satellite data modems, and flexible airtime service packages. It also sells a handheld GPS mobile satellite consumer product called “SPOT” for adventure travelers, emergency location, or anyone needing a GPS device.
Globalstar also offers commercial one-way transmission products to track cargo containers and rail cars, to monitor utility meters, to monitor oil and gas assets, and other applications. It also provides engineering services, such as hardware and software designs to develop specific applications, and installation of gateways and antennas.
Customers include the U.S. government as well as companies in the energy, maritime, and mining industries with job sites underground or out at sea.
Globalstar’s Terrestrial Low Power Service
There is another reason to like this penny stock going forward. And it’s the main reason why Globalstar’s share price soared in the first half of 2016 and suffered for much of the second half of 2016.
Of particular note is the company’s terrestrial low power service (TLPS), a frequency Globalstar wanted the Federal Communications Commission (FCC) to give it exclusive use to create a new Wi-Fi service. According to the company, because of the proliferation of Wi-Fi devices, the U.S. is basically out of Wi-Fi spectrum.
Fear not, the FCC identified several potential new bands of spectrum to alleviate the congestion, but these solutions are still years away from development. Enter Globalstar.
Back in the 1990s, Globalstar was given the rights to a part of the spectrum to make its satellite-phone business operational. Satellite phones were big business in the 1990s and early 2000s. Not so much now. What is booming, though, is Wi-Fi use.
Globalstar’s satellite spectrum is adjacent to the Public Wi-Fi Band and could be put into operation immediately, thereby increasing the country’s Wi-Fi capacity, according to the company, by a third. (Source: “Globalstar gets approval to build low-power terrestrial network with its satellite spectrum at 2.4 GHz,” Fierce Wireless, December 23, 2016.)
Globalstar petitioned the FCC for authority to offer the private WiFi channel (and charge access to it) in November of 2012. Approval of Globalstar’s Wi-Fi technology would greatly expand Globalstar’s revenue base, allowing it to lease capacity to a wireless firm or Internet company.
Naturally the idea of a private WiFi, one you would have to pay to get access to, did not sit well with companies like Alphabet Inc (NASDAQ:GOOG). Nor did it get support from Microsoft Corporation (NASDAQ:MSFT), Sprint Communications Inc, and networks like ABC and CBS, who maintained that converting Globalstar’s segment of spectrum to WiFi (that would have used part of an unlicensed bandwidth devoted mostly to WiFi, Bluetooth, and other technologies) would cause interference with other signals.
It looked like an uphill battle for Globalstar. Word on the street over the last few years was that Globalstar would fail in its attempt to create a new WiFi service. Add to that the fact that the FCC was in no rush to adopt Globalstar’s request to use TLPS, and investor fatigue set in.
After trending lower throughout the second half of 2015, Globalstar’s share price rebounded in 2016. Between January and May, the company’s share price surged 100% to around $3.00 per share. In mid-May, the Office of the Chairman of the FCC informed Globalstar, Inc. that an order regarding the company’s TLPS had been circulated and was pending action by the full Commission. (Source: “Statement Regarding Commission Circulation of an Order in IB Docket No 13-212,” Globalstar, Inc., May 13, 2016.)
Globalstar Hits a Setback
The optimism that sent Globalstar’s share price to a 52-week high was short-lived. In early June, it was revealed that two members on the five-panel FCC agency voted against the proposal.
As one might expect, Globalstar’s share price spiraled, plunging as much as 50%; hitting an intra-day low of $0.63. It closed at $0.94 on June 3 and hovered at around $1.20 per share throughout the summer.
There remained a sliver of hope.
According to one report, FCC Chairman Tom Wheeler backed the plan. The remaining votes fell to one member, who generally backs Wheeler, and the deciding vote was thought to land with a member of the FCC panel that backs the expanded use of Wi-Fi. (Source: “Globalstar Plan May Hinge on Regulator Who Supports Critics,” Bloomberg, June 7, 2016.)
Barring any leaks, Globalstar’s share price remained under pressure.
Globalstar Presents New Plan
The unknown has a way of forcing one’s hand. In early November, Globalstar announced it was scaling back its proposal to launch a private WiFi network. Instead, the company told the FCC that it wanted to only use the low-power terrestrial service in its licensed mobile satellite spectrum. The revised proposal was designed, the company said, to expedite the approval process by resolving “all remaining interference-related concerns.” (Source: “Letter to the FCC,” Federal Communications Commission, November 9, 2016.)
Within days, Sprint, the Wi-Fi Alliance, NCTA, CableLabs, and Entertainment Software Association expressed support for the revisions. (Source: “Globalstar back in play as FCC considers revised proposal,” FierceWireless, December 21, 2016.)
On December 23, it was announced that the FCC approved Globalstar’s plan for a land-based wireless service using its own, private spectrum. The proposal will still make more spectrum available to U.S. consumers and improve wireless broadband service. (Source: “FCC Adopts Globalstar Order,” Globalstar, Inc., December 23, 2016.)
“We look forward to a busy 2017 as we plan to put our terrestrial authority to use for American consumers and pursue similar authority internationally,” Globalstar Chairman and CEO Jay Monroe said in a press release.
Investors responded favorably to the news. Globalstar entered December trading at $0.80 per share. By December 23, shares had climbed 150% to an intra-day high of $2.00. That’s still down significantly from 2016 highs of around $3.00. But the company has held onto recent gains, trading near $1.50.
With solid support and momentum, this does not bode well for those shorting the stock. Globalstar currently has a high short percentage of float at 20.07%! The stock currently has 60.83 million shares held short. (Source: “Globalstar, Inc. (GSAT),” Yahoo! Finance, last accessed January 31, 2017.)
2017 Is a New Year for Globalstar
The company that fought an uphill battle is suddenly looking a lot more attractive to Wall Street. In January, the company presented a series of investor meetings hosted by JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS), and Cantor Fitzgerald & Co Inc in New York.
That doesn’t mean it’s clear sailing for Globalstar. It has approval from the FCC, now it has to build a network and devices to support its spectrum.
This will take some doing. And money. To get this done, Globalstar will most likely need to make a deal with a bigger partner. But with whom? Sprint likes what it sees. A deal with Verizon Communications Inc. (NYSE:VZ), T-Mobile US Inc (NASDAQ:TMUS), or AT&T Inc. (NYSE:T) could also help the company generate serious income and lead to sustained long-term growth, something all patient penny stock investors who have been holding onto Globalstar have been waiting for.
No matter how you look at it, 2017 will be an exciting year for Globalstar and investors.
