Hedge fund says DISH stock should be trading at half its current value


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Michelle Clancy

| 17 May 2016

| 17 May 2016




A prominent hedge fund has made the case that DISH Network’s spectrum is way over-valued.



dishThe market values the satellite provider’s holdings at about $18.5 billion, but Kerrisdale Capital said that it’s worth $5.65 billion at best, and only $118 million in the worst-case scenario.

And because that wireless spectrum is worth about a third of the value Wall Street has placed on it, the firm argued that the stock should be trading at less than half its current price.

Of course, Kerrisdale likely has an ulterior motive here: it has tweeted that it plans to short Dish stock — a pronouncement that sent the satco’s shares tumbling 13%, dipping as low as $46.68 per share in trading last week.

It also showed a lack of understanding about how spectrum works: it argued that carriers can simply “build more cell sites” to boost capacity. But cell sites need spectrum to function, and anyone in the business of delivering video content knows that spectrum is indeed in too short supply today to accommodate future traffic growth.

Nonetheless, Kerrisdale insists that DISH stock is living on borrowed time, and that it should be worth only about $8 to $20 per share.

“Dish’s swagger alone has convinced many that, no matter how much it seems like there’s no real plan, everything will somehow work out anyway,” Kerrisdale said in the report. “But, considered dispassionately, Dish’s current strategic direction was always a dangerous longshot: levering up a slowly decaying business to double and triple down on an illiquid, highly specialised, highly regulated, limited-life, non-cash-flowing asset with only two to three plausible buyers. Dish has outlived many skeptics over the years, but, in investing as in gambling, there’s such a thing as pressing your luck.”

For its part, DISH was having none of it: "We understand Kerrisdale is shopping a negative report on Dish and may be shorting our stock in an attempt to make a short-term gain while we are in an FCC-mandated quiet period,” it said in the statement. “We will continue to manage the business for the long-term benefit of our shareholders as we have done over the last 35 years.”