Towerstream, Clearwire: The poster children for WiMAX
Wall Street wasn't too excited over fixed broadband provider Towerstream's first day of trading on the Nasdaq Capital Market last week as the operator saw its shares fall 3 percent. Towerstream launched as a startup more than seven years ago to provide fixed broadband wireless services to businesses and has been steadily building momentum in the markets it serves by providing T1-class wireless broadband connectivity.
In January, the company went public after completing an alternative public offering--a process by which a private company goes public by conducting a reverse merger with an existing but non-operating company and simultaneously raises equity capital. Towerstream completed a reverse merger with Canadian calendar producer, University Girls Calendar Ltd!, raised $14.9 million and began trading on the OTC Bulletin Board under the symbol TWER. Towerstream's shares closed on that board last Wednesday at $7.66 each and opened on the Nasdaq Capital Market Thursday at $7.75. The company said it would offer up to $40 million in common stock.
By the end of Thursday's trading, Towerstream's stock had fallen 23 cents, or 3 percent, to $7.46 a share. Certainly the drop isn't as big as Clearwire saw after its $600-million IPO, but it shows that investors aren't quite so confident of the market for a pure wireless broadband play.
Towerstream has seven years of proving its pre-WiMAX fixed technology works in big cities, but now it is ramping up for some aggressive sales in its 10 markets and expects a net loss going forward. In a Securities and Exchange Commission filing, Towerstream said it recorded a net loss of $1.64 million in the first quarter, compared with a net income of $15,124 in the same period last year. Revenues increased 4.3 percent to $1.58 million over the year.
Clearwire has warned about continued hefty losses as it builds out its mobile WiMAX network. The company announced its first-quarter results that reflected a loss of $92.6 million, or 64 cents a share, compared with a loss of $55.3 million, or the equivalent of 73 cents a share, a year ago.
With pre-standards services and capital-intensive business plans that will likely see them tap the markets for hundreds of millions more before they see a profit, both Towerstream and Clearwire can be seen as risky propositions.
Yet these two companies are the poster children for the WiMAX industry--with Towerstream touted as the model for fixed WiMAX (although it hasn't actually deployed standardized WiMAX yet) and Clearwire being seen as one of the early models for mobile WiMAX (it hasn't deployed mobile WiMAX yet either). So these companies' moves into the public financial markets make their success even more important to the entire WiMAX industry. And the last thing the WiMAX industry wants is Wall Street to sour on WiMAX before the market takes off.--Lynnette