Clearwire (NASDAQ:CLWR) said it agreed to sell up to $300 million in shares as part of an equity infusion, and has contracted with financial services firm Cantor Fitzgerald to conduct the sale, according to a filing with the Securities and Exchange Commission.
The filing, posted late Friday, said that Clearwire had agreed to allow Cantor Fitzgerald to sell its Class A Common Stock. The companies can each terminate the deal at any time.
Clearwire had indicated earlier this year that it had enough money to stay afloat until the end of the year but that it might need more financing beyond that. The company's adjusted EBITDA in the first quarter was a loss of $38.2 million, up from an EBITDA loss of $210.3 million in the year-ago quarter.
Financial analysts had mixed to negative views on the new equity infusion. "The good: We estimate that Clearwire needs about $1.8 billion of capital to reach cash flow break even. We estimate that they will need new capital by mid-2013 (assuming they are able to secure $300 million in vendor financing). This will provide funding through the June coupon payment," Credit Suisse analyst Jonathan Chaplin wrote in a research note. "The bad: We had hoped that the company would be able to fund itself through new wholesale arrangements with prepayments and a spectrum sale. This suggests that neither transaction is imminent; however, we believe the company is in talks on both fronts and the increased cash cushion should improve their negotiating position."
During Clearwire's first-quarter earnings conference call, Clearwire CFO Hope Cochran said that when the company purchases TD-LTE equipment, likely in the third quarter, it will look to receive vendor financing as part of that process. "As we receive those invoices in, I will be looking to finance those as we work with vendors as part of our vendor choosing process, I would say, to make sure that we've got the financing lined up alongside that agreement," she said, according to a Seeking Alpha transcript.
Jefferies analysts Thomas Seitz, Kunal Madhukar and Ankit Sharma wrote in a research note that the new equity could be driven by a number of factors, including limited access to vendor financing, a cost overrun on Sprint Nextel's (NYSE:S) LTE network buildout or to buy time as Clearwire waits to sell some of its spectrum.
"We believe the key question for CLWR shares is the timing of which comes first--a spectrum sale or a challenging liquidity event," they wrote. "We are maintaining our Hold rating for multiple reasons--(i) there is significant uncertainty with regard to possible outcomes, (ii) the outcome in the spectrum market may not be clear for quite some time, (iii) in the near-term, the supply of shares could be elevated, and (iv) negative investor reaction to the fact that management may believe an equity raise at current share prices is prudent."
Clearwire's stock was down around 13 percent following the news to around $1.32 per share.
- see this SEC filing
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