Globalstar shares surged after Apple’s deal was revealed

Apple CEO Tim Cook speaks at an event at the Apple Park campus in Cupertino, California, on September 7, 2022. In a presentation dubbed Far Out, Apple is set to unveil its iPhone 14 line, a new slate of smartwatches and devices The new AirPods.

Nick Korean | Bloomberg | Getty Images

Mobile satellite communications company Global Star Its shares saw a 42% jump after being halted by the news on Wednesday. The company revealed during apple‘s Annual fall hardware launch event It will operate an emergency satellite service for the upcoming iPhone 14

The stock quickly gave up most of those gains and is currently trading up about 5% for the day, having fallen more than 10% prior to the announcement. However, the stock movement shows how exposure to a large tech company like Apple can have a significant impact on the operations of a smaller entity.

In early 2020, Global Star He said It agreed to provide services to an unnamed “potential client.” Wednesday Globalstar open In this customer’s organizational file is Apple.

A copy of the agreement shows that Apple can choose to receive guarantees to purchase up to 2.64% of Globalstar’s outstanding shares at $1.01 per share. But Apple is not obligated to receive warranties.

Globalstar now forecasts 2023 revenue between $185 million and $230 million, depending in part on the degree to which it meets targets associated with its deal with Apple. Analysts in a Refinitiv survey previously expected the company to generate $130.6 million in revenue in 2023.

“The company expects these financial metrics to continue to improve significantly by 2026, which is expected to be the first full year in which new satellites are operational, with total revenue expected to increase approximately 35% compared to the 2023 forecast driven primarily by revenue growth under Partnership agreements,” Global Star said.

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Apple has agreed to pay 95% of approval capital spending linked to new satellites and other costs to Globalstar, according to a report on Wednesday. Globalstar said that as part of the agreement, it must raise debt capital to launch new satellites.

Satellite communication for iPhones has been expected at least since 2021. Analysts at B Riley, who have a buy rating on Globalstar stock, said in a note last month that they suspect the mysterious potential customer is Apple.

Apple said on Wednesday That compatible iPhone antennas would be able to connect to a satellite and communicate in places where there was no regular cellular connection, and that the phone would compress a message to speed delivery to a ground station, which could then pass the message on to emergency responders.

Globalstar’s infrastructure was launched in the late 1990s through a partnership with Loral Space and Communications and Qualcomm. The Louisiana-based company filed for bankruptcy and secured support from private investment firm Thermo before an initial public offering in 2006.

Watch: Apple introduces new iPhone 14 Pro models at its September event

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