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Has anyone else looked at the Iridium Warrants lately?


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I know Tilson was snatching them up like M&M's but has anyone else given them another look recently?

 

http://quotes.nasdaq.com/asp/SummaryQuote.asp?symbol=IRDMZ&selected=IRDMZ

 

http://www.gurufocus.com/news/142481/whitney-tilson-reports-q2-portfolio-buys-nni-atvi-pby-xrx-c-ibkr-hhc-bcsi-dell

 

These are the top 5 holdings of Whitney Tilson

 

  1. Iridium Communications Inc Warrants Expiring 2/14/ (IRDMW) - 6,034,307 shares, 4.9025% of the total portfolio. Shares added by 42.15%

 

Added: Iridium Communications Inc Warrants Expiring 2/14/ (IRDMW)

 

Whitney Tilson added to his holdings in Iridium Communications Inc Warrants Expiring 2/14/ by 42.15%. His purchase prices were between $2.18 and $2.86, with an estimated average price of $2.52. The impact to his portfolio due to this purchase was 1.45%. His holdings were 6,034,307 shares as of 06/30/2011.

 

 

 

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Why would you want to buy warrants in a chapter 22 going to a chapter 33 company?  The economics of Iridium do not make sense and the last time I checked Tilson's valuation was based upon what I would call aggresive projections.  I used to work in the industry and have seen this show before.

 

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Says Tilson:

 

Iridium is growing rapidly: last quarter, subscribers grew 25% YOY, operational EBITDA rose 29% and net income was $8.3 million vs. -$1.3 million in the previous year’s first quarter. Funding is in place for the next generation of satellites, Iridium NEXT. At $8.62, the stock trades at 3.9x the midpoint of this year’s estimated operational EBITDA, well below its closest comp, Inmarsat.

 

Here is his presentation from May...

 

http://www.tilsonfunds.com/IRDM-4-11.pdf

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You have to be careful about the current level EBITDA because it is dependent upon spending an addtional $3 billion on a new constellation so there is a significant difference between FCF and EBITDA in this case.  If you like satellites, look at APT or Asia Satellite.  Cheaper and the have busienss that does not require alot of investment with questionable returns.

 

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