Clearwire Trading Above Implied Buyout Valuation

David Faber on CNBC is talking up Clearwire Corp. (NASDAQ: CLWR) about the interest by Sprint Nextel Corp. (NYSE: S) but the details remain murky. Yesterday we noticed that options traders were valuing the top buyout price around $2.30 or $2.35, based on late-day trading indications. The problem is that shares rose higher into the close and ended at $2.22 rather than the $1.95 to $2.00 when the options were active.

Today’s comments from David Faber have rekindled interest, although the news is the same and we wonder how much higher Sprint can let this get before it announces a takeover. The might even be what is called a “takeunder” because Clearwire shares were trading down at $1.30 before the Sprint-Clearwire-Softbank news broke.

Clearwire is now up 10% at $2.45 and the consensus standalone value of Clearwire is only $2.20, according to Thomson Reuters consensus data. We already have seen a whopping 22 million shares trade hands, and that is after a massive 170 million shares traded hands on Thursday.

It is still too early in the trading day to give a clear projection of what options traders are valuing a Clearwire acquisition at yet. Stay tuned.

We worry about the consensus price target being under the trading price, although analysts may have a much higher implied buyout valuation versus a standalone operating valuation. As a reminder, the biggest issue is the $4+ billion in debt that Clearwire has. As a reminder, there is no assured limit as to what a buyer would pay, and a buyer may value this spectrum acquisition far higher than what analysts and options traders value the company.

JON C. OGG