By Andrew Bary
SpaceX play EchoStar is down sharply Friday even as SpaceX stock surges in its initial day of trading.
The surprising disparity creates an opportunity for investors willing to buy a SpaceX proxy at what appears to be a sizable discount to its net asset value.
EchoStar stock (ticker SATS) is down 11.4% at $113.52 Friday after trading in a wide range between $106 and $131. The shares now are way below their peak of $148 last month. SpaceX stock is having a strong debut, rising 28.9% to $174 from its IPO price of $135 in afternoon trading.
EchoStar reached a deal to sell spectrum to SpaceX in two transactions in 2025 to further SpaceX's mobile-phone aspirations. As part of its consideration, EchoStar is due to receive about 262 million shares of SpaceX stock, a roughly 2% stake in the company, according to the SpaceX prospectus. That stake is now worth about $46 billion, Barron's calculates.
EchoStar's equity market value now is roughly $39 billion assuming conversion into stock of a convertible bond deal.
TD Cowen analyst Greg Williams last month estimated EchoStar's net asset value at $155 a share. His estimate then valued the SpaceX stake at $31 billion, considerably below the current value. Williams has a Buy rating on the stock.
Adjust his analysis for the current SpaceX market price and conservatively assume a provision for taxes, and Barron's calculates a net asset value of $185 to $190 per share.
The bull case on EchoStar is that it's a cheap play on SpaceX and could have strategic value for Elon Musk's company as it pursues its strategy of significantly building out satellite-based internet and mobile phone services in the coming years.
In a recent report on SpaceX's potential impact on the telecom industry, Oppenheimer analyst Tim Horan wrote EchoStar's Boost mobile phone service could appeal to SpaceX.
"We suspect SpaceX could acquire Boost or all of SATS as a basis for building out a terrestrial network," Horan wrote.
So why is EchoStar trading cheaply relative to its estimated net asset value and why is its stock price down Friday?
There could be a few reasons -- some of which were laid out in an article on EchoStar earlier this week. Barron's also has written favorably on EchoStar this year.
There could be profit-taking in EchoStar stock after its sharp run-up over the past year.
Wall Street may be anticipating less demand for EchoStar after the SpaceX IPO since investors can directly own SpaceX and won't need a proxy.
EchoStar isn't due to receive the SpaceX stock until 2027, and that creates an uncertainty factor and the possibility that SpaceX stock will be lower in 2027 when EchoStar gets the shares.
EchoStar isn't a pure play on SpaceX. It operates a satellite TV business, a mobile phone operation and satellite services. It has more than $20 billion of debt, and reached a deal last year to sell spectrum to AT&T for about $23 billion in cash.
Then there is the Charlie Ergen factor. The EchoStar chairman, CEO and controlling shareholder is an industry maverick. It's unclear what his long-term plans are for the SpaceX stake and the company. EchoStar opted not to hold a conference call after its May earnings release, meaning investors don't have a recent update on his thoughts.
Ergen is 73 and a potential deal with SpaceX would offer him an exit strategy.
EchoStar stock looks too cheap now given the high value of its SpaceX stake, its other assets and a potential deal with SpaceX.
Write to Andrew Bary at andrew.bary@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 12, 2026 14:48 ET (18:48 GMT)
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