Short-selling investment firm Kerrisdale Capital released a report recently in which it accused Dish Network Corporation of sitting on a spectrum goldmine whose real value is not as much as what the market is led to believe. The release of the report incidentally takes place days before the FCC is set to host an auction of 126 MHz of spectrum for which over 100 entities are expected to place their bids. Following the report, Dish's stock fell from $47 to $45 and the company on its part has rubbished Kerrisdale's report as 'an attempt to make a short-term gain while DISH is in an FCC-mandated quiet period.' In its report, Kerrisdale says that 'we believe that the fair value of DISH’s equity is 58% lower than the current stock price – and, in a reasonable downside scenario, more than 80% lower.' The report also alleges that all carriers have plenty of spectrum and reports about scarcity of spectrum is vastly overstated.
As a short-seller, Kerrisdale's business thrives when the stocks of companies fall and when it is able to buy back the stocks at a lower price, thus making a sizable margin. It has been alleged that by publishing a damning report about Dish, Kerrisdale might be planning to pounce on any short-term fall in Dish's stocks. However, a company spokesman has said that Kerrisdale is not interested in partnering with any carrier which has eyes on Dish's spectrum holdings. As per Fierce Wireless, either AT&T or Verizon may purchase Dish's mid-band spectrum holdings in the near future. Dish currently owns 75 MHz of spectrum in the country and company executives have confirmed reports that it may sell some of its spectrum or partner with other carriers to build networks by using its licenses.
Wall Street has not reacted kindly to Kerrisdale's damning report on the value of Dish's spectrum holdings. Citi Research has published a report named "Kerrisdale: Absolutely Not a Thesis Changer" which said that carriers do not have excess spectrum capacity as alleged by Kerrisdale. At the same time, Jonathan Chaplin, an analyst at New Street Research, said that had carriers been sitting on a vast amount of spectrum, they would not have shown much interest in the upcoming 126 MHz spectrum auction. Instead, carriers have raised $40 billion in bids for the available spectrum. However, on a different note, Dish's enormous appetite for new spectrum holdings and its aggressive bidding in FCC's auctions suggests that Kerrisdale's accusations may not be wholly untrue. During an FCC spectrum auction last year, Dish spent a massive $13.3 billion to buy 702 licenses and gaining more spectrum than any other wireless carrier. The company is also planning to make a business of it by leasing its spectrum to carriers who need more airwaves to sustain themselves. Back in November, Fran Shammo, CFO for Verizon, said that the carrier was not interested in leasing Dish's spectrum and if they wanted more spectrum, they would have placed their bid during the FCC spectrum auction.