by Lisa Swan on May 2, 2012
The ongoing saga of hedge fund manager Philip Falcone and the telecommunications company LightSquared took a new turn this week. After pressure from creditors, Falcone, the founder of Harbinger Capital Management and a director of LightSquared, said he would step aside from the company “eventually,” as Mike Spector and Greg Bensinger put it in the Wall Street Journal.
The move may keep LightSquared from having to file for bankruptcy, for now, at least. The Journal says, though, that Falcone had been considering bankruptcy as the “best way” for him to still be involved with LightSquared; the hedge fund manager has said that he fears that the creditors want to “take control and flip” the company. Falcone agreeing to step away at some point could get a “one-week extension on a debt-term violations waiver,” the Journal says.
Falcone has invested mucho dinero from his hedge fund into a wireless communications company. This, even though he had gotten all sorts of criticism and warnings about doing so. LightSquared ran into a huge snag this year when the Federal Communications Commission said that the company’s wireless signals could potentially interfere with GPS transmissions.
Now Falcone is saying that he really doesn’t want to be involved with the company anymore, anyway, and indicated that he is taking his ball and going home. “I’ve only been on the board for two months and it was always supposed to be temporary,” Falcone wrote in an email to the Journal. “I am not an officer nor did I ever plan to be one. The board and the company need telecom and industry veterans, not hedge-funds managers.” Gee, ya think?
Falcone may have a $49 million mansion in Manhattan that once belonged to Bob Guccione, but he doesn’t appear to have the best common sense. People cautioned him against LightSquared for years, and he didn’t take heed. Just because a hedge fund guy makes a lot of money on some smart business decisions, doesn’t mean that his prognostication skills are always solid. Falcone is proving that every day. He may have guessed right on subprime mortgages, but that doesn’t mean that plowing billions into LightSquared made a lot of sense.
He’s still gung ho on LightSquared, though — so much for distancing himself. Falcone recently told CNN in an interview airing this week that “Everybody wants mobility” and that “everybody wants not only connectivity but everybody wants instantaneous connectivity.” He also said: “They want the world at their fingertips. Well, there’s only one way that you can do that: wireless.” Of course, if the FCC won’t let you operate, that’s kind of a tough problem to surmount, isn’t it?
Lisa Swan is a Feature Writer for the Compliance Exchange and Wall Street Job Report. She is also a columnist for The Faster Times and a blogger for Subway Squawkers. Her work has also appeared in the New York Daily News, Yahoo Sports, Huffington Post and the books Graphical Player 2011 and Graphical Player 2010.