IMAGE SOURCE: Straight Path Communications Inc.
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Shares ofStraight Path Communications Inc.(NYSEMKT: STRP) were up 30.2% as of 11:15 a.m. EST Thursday after the wireless spectrum licensing company announced a settlement in a previously disclosed Federal Communications Commission investigation.
For perspective, recall that Straight Path stock plunged in late 2015 after multiple short-sellers' reports allegedthe company renewed certain 39 GHz spectrum licenses with the FCC under fraudulent circumstances.
Today, Straight Path announced it has entered into a "consent decree" with the FCC, under which the latter has agreed to terminate its investigations. In exchange, Straight Path has agreed to pay a $15 million civil penalty in installments over a nine-month period, and will surrender 93 of its 828 39 GHz spectrum licenses to the FCC, leaving it "with a full national network of 735 licenses." Straight Path will also keep all of its 28 GHz spectrum licenses.
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But only for now.
Straight Path also agreed that if it does not sell its remaining spectrum licenses within one year, it will pay an additional penalty of $85 million or surrender those licenses to the FCC. Straight Path must also pay the FCC 20% of the proceeds from the sale of its remaining 39 GHz and 28 GHz spectrum licenses.
Straight Path's press release appears to be spinning the situation in a much more positive light, noting that it retains most of its licenses, which allows the company "to continue as a leader in the next frontier of telecommunications."
Straight Path's PR also says, "With this settlement, we have cleared the way for a review of strategic alternatives to maximize shareholder value" -- even though it's being effectively forced to sell those spectrum licenses and share the profits with the FCC or pay a hefty additional penalty and surrender the licenses anyway. But considering the aforementioned short reports warned the stock could be worth only $1 to $2 per share, or "approximately liquidation value," and with shares currently trading just below $41, it certainly could have been worse.
For now, I'd rather not wait to see how much Straight Path is able to sell its remaining spectrum licenses, and I think investors would be wise to take today's profits and put them to work elsewhere.
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