President Donald Trump has reportedly intervened in a dispute between EchoStar (SATS 4.03%) and the Federal Communications Commission (FCC), urging the two sides to come together and work out a deal. Absent a resolution, EchoStar was said to be considering a bankruptcy filing.
Investors are understandably excited by the latest development, sending EchoStar shares up 40% as of 10 a.m. ET.
Image source: Getty Images.
Walking back from the brink
EchoStar is a satellite television and communications company that's building a nationwide cellular business under the Boost Mobile brand. However, that network rollout requires a lot of spectrum, and the FCC is displeased with the speed at which that spectrum is being deployed.
There's at least the potential for the FCC to seize some or all of the spectrum and allocate it to others who have clamored for access, including SpaceX. In response, EchoStar was said to have been considering a bankruptcy filing, which caused the company's shares to plummet last week.
According to Bloomberg, Trump has reached out to EchoStar Chairman Charlie Eagan and FCC chair Brendan Carr to urge the two sides to come to a deal that would allow EchoStar to avoid a bankruptcy filing.
NASDAQ: SATS
Key Data Points
Is EchoStar stock a buy?
The latest report is good news for EchoStar shareholders, but the company isn't out of danger yet. A deal could involve EchoStar selling some of its spectrum licenses, which could put Boost at a long-term disadvantage. Alternatively, the two sides could fail to reach an agreement, which could cause the stock to give back Monday's gains.
Investors considering buying the stock today should keep those risks front of mind and limit EchoStar to a small part of a well-diversified portfolio.
