03.26.12

Negative equity…

Posted in Financials, LightSquared, Operators, Spectrum at 6:27 pm by timfarrar

Today news has emerged that Harbinger posted a near 30% decline in its flagship fund in February, due to a writedown of the value of its LightSquared equity investment by “outside auditors”. This comes on top of writedown of its LightSquared investment late last year, which led to the fund declining 47% in 2011, after a 59% cut in the value of its LightSquared holdings.

At the end of January 2012, Harbinger reportedly valued LightSquared’s equity at $1.5B, implying that prior to the 2011 markdown it was valued at ~$3.65B, for a total LightSquared enterprise value of perhaps $6B, given the amount of additional funds that had been raised. The new valuation being put on LightSquared’s equity is not stated, but can be deduced from the fact that in January Harbinger’s largest fund reportedly had total assets of $2.4B, of which $1.07B was LightSquared debt and equity. If the LightSquared equity component was ~$1B, then a ~30% writedown in the fund’s overall value could equate to as much as a 70%-75% writedown in the value of LightSquared’s equity. In other words, LightSquared’s equity may now be valued at less than $500M by Harbinger’s outside auditors.

While this valuation may soon be irrelevant once LightSquared files for bankruptcy, one interesting side effect is that the cut in the value of Harbinger’s fund appears to make it very likely that Mr. Falcone is no longer a billionaire, as was indicated by Forbes just a few weeks ago. The Forbes calculation came just prior to the February writedown, and given that Mr. Falcone’s wealth moves very much in line with the value of Harbinger’s fund (because as he told Vanity Fair last summer “I have always kept the bulk of my money, and I mean the bulk of my money, in the fund”), the 30% writedown seems all but certain to have cost Mr. Falcone more than $100M of the $1.1B that Forbes calculated he was worth last month.

1 Comment »

  1. Verizon drops LTE-capable LG Lucid for $79; Sprint’s Dan Hesse gets $12M | tablet123.com said,

    March 27, 2012 at 8:18 pm

    [...] The value of LightSquared continues to fall. Post [...]

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