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Shares of satellite company Globalstar soar after disclosure of Apple deal

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

Nic Coury | Bloomberg | Getty Images

Mobile satellite communications company Globalstar saw its shares soar as much as 42% after being interrupted for news on Wednesday. The company revealed at Apple’s annual hardware launch event that it will operate a satellite-powered emergency SOS service for the upcoming iPhone 14.

The stock quickly gave up most of those gains and is currently trading down around 5% for the day, having fallen more than 10% before the news. Nonetheless, the stock move shows how exposure to a large tech company like Apple can have a significant impact on the operations of a small entity.

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In early 2020, Globalstar said it had agreed to provide services to a “potential client” it did not name. On Wednesday, Globalstar disclosed in a regulatory filing that the customer is Apple.

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

Globalstar now sees revenue of between $185 million and $230 million in 2023, depending in part on how well it meets targets related to its deal with Apple. Analysts polled by Refinitiv previously expected the company to earn $130.6 million in revenue in 2023.

“The company expects these financial metrics to continue to improve significantly through 2026, which is expected to be the first full year in which the new satellites will be operational, with total revenue increasing. is expected to increase approximately 35% from the 2023 guidance, primarily due to revenue growth under partnership agreements,” Globalstar said.

Apple has agreed to pay Globalstar 95% of approval capital expenditures related to new satellites and other costs, according to Wednesday’s filing. Globalstar said as part of the deal, it needs to raise more debt capital to launch the new satellites.

A satellite connection for iPhones had been expected at least since 2021. Analysts at B Riley, who have a buy rating on Globalstar shares, said in a note last month that they suspected the potential mystery shopper was Apple.

Apple said Wednesday that a compatible iPhone’s antennas will be able to connect to a satellite and communicate in places where there’s no regular cellular connectivity, and a phone will compress a message to speed up delivery to a station. on the ground, who can then transmit the message. to rescuers.

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