market folly

We're posting up a series of presentations from the recent Kase Learning Short Selling Conference.  Next up is Jillian McIntyre of 221B Capital who pitched a short of Intelsat (I).  She runs a fundamental long/short equity fund, typically running 20% net short, typically focuses companies with poor corporate governance (Germany, UK, South Africa, Australia).  Previously worked with Sir Chris Hohn's TCI Fund.


Jillian McIntyre's Presentation: Short Intelsat

- 50% downside in her opinion, only 7% short interest.  $14bn of debt, $1bn run-rate of interest every year, negative cashflow

- Believes company is ripe for technology disruption and has a bad business model; needs capital ASAP

- Company is in satellite communications, provides signal broadcast to major networks, media companies etc.  Mainly exposure to Latin America and Africa.  Thinks there's some similarities to SunEdison (which they pitched back in 2015 which went bankrupt): levels of indebtedness & bad business model

- The recent hype surrounding 5G and the big spectrum auction in November has led to irrational exuberance as Intelsat is up almost 300% this year.  Lot of hype around the potential for C band spectrum.  Even if it's allowed by FCC, could take over a year to start to monetize it.  She thinks the company will see disruption in its ancient satellite model.  Lower-orbit satellites will be launched and are better and cheaper than Intelsat's much higher satellites.  Lots of hype also around potential with 'OneWeb'

-  Co has very complex debt structure and is a serial re-structurer: they think it breached covenants and will need to raise $400-500 million and worst case $1.5-2 bn. Don't think they have access to new revolving credit facilities.  Thinks they have aggressive accounting regarding bad debt provision and amortization rates and reliance on future revenue


Embedded below is the video of Jillian McIntyre's presentation:





Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.