TerreStar Right back to a Penny Stock
TerreStar Corporation (NASDAQ:TSTR) had the makings of more than a penny stock in September when the company announced an agreement with AT&T (NYSE:T) to bring to market the TerreStar GENUS Smartphone that could be used anywhere in the world, including the oceans. However just when TerreStar's stock price was heading back up the rally fizzled out and back we sit at 12 cents a share.
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TerreStar Corp (TSTR) shares hit a new 52-week low today of 10 cents, they've managed to get as high as $1.49 over the past 12 months but the chart continues to look worse. TerreStar shares are now trading with a P/E Ratio of 0 and EPS of -1.81.
It was all too good to true, TerreStar made the deal to use AT&T's wireless connectivity with the ability to use an all-IP satellite network as back up throughout the United States. Using one phone number and one device, users were promised to be able to access voice and data services in the United States, Puerto Rico, the U.S. Virgin Islands and offshore coastal waters over either the AT&T cellular network or the TerreStar satellite network. The $799 device was expected to hit retail stores by the end of the year, but then -- bankruptcy?
Last week following a Wall Street Journal article reporting that the debt-laden TerreStar Corp (TSTR) "is preparing a possible filing for bankruptcy protection." TerreStar shares went from 40 cents to 18 cents in a heartbeat and watched its market capitalization shrink from $55.4 million to today's valuation of just $16.8 million.
AT&T is pitching the Genus to professional customers via traditional business channels. How many of those potential customers are going to sign a contract for a phone running off the wireless network of a company in bankruptcy?
(http://www.itworld.com)TerreStar has borrowed heavily to finance the build-out of its satellite-based network. According to the WSJ, TerreStar has more than $1 billion in debt. In addition, TerreStar has generated almost no revenue. That's a tough combination.
The company has made no secret of its financial peril. In its latest quarterly report in August -- in which it reported a loss of 45 cents per share -- TerreStar said, "Based on our current plans, there is substantial doubt that the available cash balance, investments and available borrowing capacity as of June 30, 2010 will be sufficient to satisfy the projected funding needs for third quarter of 2010."
That's a long way of saying "We probably going to run out of money."
TerreStar also said, "If we fail to obtain necessary financing on a timely basis, we may be forced to curtail operations or take other actions that will impact our ability to conduct our operations as planned."
TerreStar, a potential game changer of a company has been crushed by Wall Street and trading its shares now belongs to the penny stock chasers.