Straight Path Communications Buyout Blindsides Short Sellers

Shares of Straight Path Communications Inc STRP were seen skyrocketing more than 150 percent Monday morning after AT&T Inc. T announced a $1.6 billion all-stock buyout of the communications company. The buyout price of $95.63 is an incredible premium to where Straight Path was trading just three years ago. Straight Path spent most of late 2014 and early 2015 trading in a price range between $5.00 and $8.00/share.

On Twitter, QTR Research noted the incredible gains Friday call buyers are experiencing on Monday.

$STRP $50 calls last sold for $0.25 on Friday, will be about $42.00 on open - that is a 16,700% gain or 167x your money

— Quoth the Raven (@QTRResearch) April 10, 2017

Straight Path is one of the largest holders of 28 GHz and 39 GHz millimeter wave spectrum in the country, which made it an appealing buyout target for AT&T.

In a statement, AT&T said the deal “will support AT&T’s leadership in 5G, which will accelerate the delivery of new experiences for customers and businesses like virtual and augmented reality, telemedicine, autonomous cars, smart cities and more.”

Straight Path And Shorts

Straight Path has been the target of several short sellers in recent months, including Kerrisdale Capital and The StreetSweeper. According to shortsqueeze.com, the stock had an extremely high short percent of float of 49.3 percent prior to the deal.

In January, Kerrisdale estimated that Straight Path stock had as much as 70 percent downside ahead after the stock gained 24 percent following a $15 settlement with the U.S. Federal Communications Commission (FCC). Kerrisdale believed potential buyers such as AT&T and Verizon Communications Inc. VZ would see little value in Straight Path’s spectrum due to the “abundance of competing spectrum” on the market.

On Monday, Kerrisdale Capital's Sahm Adrangi told Benzinga that the firm didn't see the AT&T deal as likely, and traders should not to read too much into the deal when it comes to other spectrum owners. Adrangi added that each spectrum play is a unique situation and said Kerrisdale still sees Globalstar, Inc. GSAT as "a zero."

Straight Path shares are now up about 125 percent since Kerrisdale’s bearish note was released in January.

Related Links:

Straight Path Faces 70% Downside, Kerrisdale Still Says Market Overreacted To FCC Settlement

GoFundMe Campaigns Raise Nearly $300,000 To Buy Congress' Internet Data _________ Image Credit: By Kaldari - Own work, Public Domain, via Wikimedia Commons