Shares of troubled Dish Network parent EchoStar have fallen sharply Monday in the wake of a downbeat second-quarter earnings report, with chatter continuing about a potential bankruptcy filing.
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The stock was off 10% at mid-day, trading at around $15. It had recovered in recent months after a particularly rough patch early in the year following the merger of EchoStar and Dish.
EchoStar on Friday reported disappointing quarterly results, with a loss of $1.15 per share more than double the consensus estimate of Wall Street analysts. Revenue met expectations. In addition to the spotty financials, the company reminded investors that it is working to negotiate with creditors ahead of a $2 billion debt maturity in November. CEO Hamid Akhavan said “constructive discussions” were ongoing with debt-holders.
In a scorching note to clients that reaffirmed his earlier take on the situation, veteran analyst Craig Moffett of MoffettNathanson said EchoStar is “highly likely to go bankrupt, quite possibly by the end of the year.”
The combined company is struggling with a pivot initiated by Dish toward the wireless business. It has accumulated significant wireless spectrum holdings and also acquired assets including Boost Mobile that government regulators required Sprint to sell off when it merged with T-Mobile.
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As it continues to push toward wireless, the company is seeing video losses accelerate. At the end of the second quarter, it had 8.07 million pay-TV subscribers, including 6.07 million on traditional satellite and 2 million on the internet-based Sling TV service. Four years ago, Dish had 11.42 million total pay-TV subscribers — almost 9 million in satellite and 2.46 million at Sling.
Dish’s satellite business is in “free fall,” Moffett wrote. “To be fair, there can’t possibly be anyone still hoping to see results for a linear TV provider improve. But the Pay TV segment is, or was, supposed to be the cash cow to help fund a growth wireless business. Neither part of that story is working.”
CFO Paul Orban told Wall Street analysts on the call that the company had $521 million in cash, cash equivalents and marketable investment securities as of the end of the second quarter. “Currently, we do not have the necessary cash on hand and projected future cash flows to fund fourth quarter operations for the November ’24 debt maturity,” Orban said. The company is “working to address this with a refinancing activities in our discussion funding sources at all levels in our capital structure,” he added, including $1 billion in planned cuts to expenses.
Asked on the company’s earnings call about expectations around timing of the debt talks, Orban said it is not certain, suggesting a longer white-knuckle ride could be in store for investors. “We’d love to raise the money, and as soon as possible,” he said. “But we have the latitude to wait to have basically the day before if we had to.”
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