Some investors are highly encouraged by Straight Path’s spectrum position—enough to help finance the company to the tune of $17.5 million in new debt financing.
The company announced last month that it had reached a $100 million settlement with the FCC, which is to be paid in installments. The settlement ended an investigation into the company’s failure to deploy wireless services as required under FCC licensing rules, and Straight Path's shares rose on the news.
Shortly thereafter, short seller firm Kerrisdale Capital issued a report saying the company was a “disgraced ‘5G’ hype vehicle” and its spectrum not worth anywhere near how the market was valuing it.
This latest funding means the company’s obligations to the FCC are covered for the next nine months, and Straight Path’s options are expanded as it continues to weigh its next steps. Straight Path is “exploring strategic alternatives for the company in order to maximize shareholder value,” Straight Path Communications CEO Davidi Jonas said in a statement without elaborating.
The expectation for a long time has been that Straight Path would sell its licenses to a network operator, be it wireless, cable or greenfield. The new funding comes from a syndicate of investors, led by affiliates of long-term shareholder Clutterbuck Capital Management. The loan is senior secured, and the lenders initially have received about 252,000 warrants with a strike price at $34.70 as part of the financing package.
"We are highly encouraged by Straight Path's recent FCC settlement and its unique position as the most significant holder of newly regulated, commercially available 5G spectrum. We are glad to help finance the company at this critical juncture, and we look forward to seeing the positive developments continue," said Robert Clutterbuck, managing partner at Clutterbuck, in a press release.
RELATED: Straight Path under fire again from short sellers who question value of its 39 GHz spectrum
The FCC commenced its investigation into Straight Path after an anonymous source alleged in November 2015 that the company obtained renewal of its 39 GHz band licenses from the FCC by submitting filings incorrectly claiming that it had constructed systems that were never built. Straight Path launched an internal investigation and concluded in July 2016 that equipment had been deployed for only a short time and that no gear was present at the time of the investigation.
Straight Path prides itself on its status as the largest holder of 39 GHz spectrum as well as a significant holder of 28 GHz in major markets. Post-FCC settlement, Straight Path holds an average of 620 MHz in the top 30 U.S. markets and covers the entire nation with 39 GHz spectrum, and it retained all of its 28 GHz spectrum licenses.
Last month, the company said it was reviewing strategic alternatives with investment banking advisory firm Evercore and looked forward to continuing its role in development of 5G technology, including accelerating hardware and software it's developing for fixed 5G in its Gigabit Mobility Lab in Plano, Texas, under the guidance of CTO Jerry Pi, a pioneer in millimeter-wave technology who previously worked at Nokia and Samsung.