Globalstar (GSAT) Stock: Why It Fell So Hard

Globalstar, Inc. (NYSEMKT: GSAT)

Yesterday, Globalstar had an incredibly hard day in the market, and for good reason. Soon, the FCC will vote with regard to airwaves, and the vote isn’t looking good. Today, we’ll talk about the details of the vote, why it’s so important to GSAT, how the stock is reacting to the news, and what we can expect to see from the stock moving forward. So, let’s get right to it…

FCC To Vote On GSAT Request

Globalstar and its investors are watching the FCC incredibly closely at the moment. That’s because much of the company’s fate could depend on a vote from the FCC that will be coming soon. You see, GSAT is working to expand the capacity of WiFi signals. To do so, the company is looking to use a frequency of airwaves that is currently reserved for satellite signals. The company says that it expects these airwaves to increase WiFi signal strength and capacity by up to a third.

While this seems like a give in, when it comes to airwaves, nothing is certain. In fact, some of the competitors that GSAT is working against, including Microsoft and Alphabet, say that the plan would be too risky. In fact, they argue that interfering with airwaves currently set aside for satellite will likely interfere with mobile devices.

The vote is getting incredibly close. So far, 3 of the 5 FCC members have voted on the issue. While one of the members has voted for allowing Globalstar to use the airwaves, two of the members that have voted made the decision to vote against the plan. Now, the company needs a positive vote from the two remaining members in order for their proposal to pass. While it is possible that the company gets both remaining votes, most are expecting that the proposal will be denied.

How The Market Reacted To The News

As investors, one of the first things we learn is that the news moves the market. Any time positive news is released with regard to a publicly-traded company, we can expect to see gains in the value of the stock associated with the company as a result. On the other hand, when negative news is released, we can expect to see declines. The news that was released with regard to GSAT was overwhelmingly negative. Globalstar has put quite a bit of money into the new technology they are working on. If the vote does not pass with the FCC, the money spent will have been wasted, and, at the moment, it doesn’t look like it’s going to pass. As a result, we saw big declines in the value of the stock on Friday. During the trading session, the stock fell to $0.95 per share after a loss of $1.14 per share, or 54.55%.

What We Can Expect To See Moving Forward

Moving forward, I have a relatively bearish opinion of what we can expect to see from GSAT. The reality is that the company is facing a big problem with the FCC, as the fate of what it believed would be its biggest product is dependent on a vote that isn’t looking good. With that said, if the final two members vote against allowing Globalstar to use the airwaves, we can expect to see more declines on the value of the stock. However, in the unlikely case that they vote for the change, we can expect to see big gains.

What Do You Think?

Where do you think GSAT is headed moving forward and why? Let us know your opinion in the comments below!

[Image Courtesy of Wikimedia]

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