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An investor sued NextWave Wireless in Delaware Chancery Court today (Aug. 31), stating that the $600 million that AT&T has agreed to pay for NextWave is too low. According to the suit, the troubled company agreed to sell itself for an initial $1 a share with possible contingent payments. The suing investor, Burt Weiss, says NextWave agreed to the price without conducting an auction or other market check, according to Bloomberg News.

The deal is unfairly designed to "cure the massive debt owed by the company to several of its officers and directors," including senior and subordinated note payoffs, "lucrative severance payments," and vested stock options, Bloomberg reported the suit alleging.

A financial analyst who contributes to this blog has figured that at the time of the AT&T deal, NextWave owed $80 million to "Papa Doug" Manchester, hotelier, Union-Tribune owner, and an original large investor in NextWave. The analyst figured that Manchester rolled over a $50 million preferred stock investment into the $80 million loan. Manchester is believed to have lost heavily on his total NextWave investment.

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Comments

Don Bauder Sept. 1, 2012 @ 7:26 a.m.

Did you mean hollow howling? Best, Don Bauder

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Twister Sept. 1, 2012 @ 11:40 p.m.

No, I wuz jist hollerin' 'bout more and more criminal activity that is apparently LEGAL.

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Don Bauder Sept. 2, 2012 @ 7:34 a.m.

Most scams are legal. That's why crooks have lawyers who follow the letter of the law, not the spirit of the law. I have been preaching this for decades. Best, Don Bauder

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Twister Sept. 2, 2012 @ 3:10 p.m.

Amen, brother! Keep on preaching!

Btw, following the letter of the law when the spirit has not been violated is a major factor in developing a police-state.

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Don Bauder Sept. 2, 2012 @ 6:09 p.m.

I find lawyers who follow the letter of the law only, permitting their clients to run scams, utterly despicable. Best, Don Bauder

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SurfPuppy619 Sept. 2, 2012 @ 8:52 p.m.

A financial analyst who contributes to this blog...

Err......can you let us knwo who this analyst is???????

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Don Bauder Sept. 3, 2012 @ 8:33 a.m.

Can't tell who the analyst is because I have no idea who he is. Like you, he uses a pseudonym. However, I know that he is excellent at financial analysis. (He's hardly the only financial analyst contributing this blog.) Best, Don Bauder

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Twister Sept. 3, 2012 @ 10:55 a.m.

How do you know he's or she's a financial analyst?

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Don Bauder Sept. 3, 2012 @ 1:24 p.m.

I can tell from the sophistication of the analysis. I was using "analyst" in the broad sense. I don't now that he or she is a registered financial analyst. He or she is just somebody who knows how to comb through financial documents and come up with excellent interpretations. So, broadly, he or she is an analyst, and a very good one. Best, Don Bauder

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Twister Sept. 4, 2012 @ 3:04 p.m.

I suspected that, but just wanted to confirm. Are there any who post here with some regularity who claim to be financial geniuses but of whose "analysis" I should be skeptical or reject out-of-hand? No names.

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Burwell Sept. 2, 2012 @ 10:54 p.m.

When Don first disclosed on this blog that Nextwave had been sold, I looked through the Forms 10-K at the SEC website and tried to calculate Papa Doug's investment in the company. I concluded that he had loaned the company about $80 million. I also read the sales agreement, and it appears that his $80 million will not be repaid. It appears that there's only enough money to repay the first lien note holders, and in order for the sale to go through, the first lien note holders had to release their security interest in the spectrum. They wouldn't release the security interest without full payment of principal and accrued interest. Papa Doug is a third lien note holder, and there's no money for the third lieners. I posted my opinion on the first blog entry that announced the sale. I've looked at those numbers a second time, and believe them to be accurate. But this is just my opinion, and I could be wrong.

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Don Bauder Sept. 4, 2012 @ 6:54 a.m.

Burwell is a pro at analyzing financial documents. Best, Don Bauder

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Visduh Sept. 3, 2012 @ 9:19 a.m.

While I know nothing specific about this company, I do know that acquirers generally overpay for the companies they buy up. That happens even when the company being bought is on the ropes in many cases. And that is one reason that I usually look askance at mergers and acquisitions and leveraged buy-outs. Those are part of the process of destruction and regeneration in a capitalist system for sure, but the reasons for that particular form are embedded in the tax code. Large and profitable corporations, rather than paying out their excess cash holdings as dividends, sit on huge piles of cash. (The dividends, even with this "favorable" tax treatment of most of them, are still taxed twice. The corporation pays tax on its profits, and then the stockholder pays again when the payouts occur. That is a disincentive to just pay the stockholders their due.) Any corporation sitting on piles of cash is endlessly pressured to DO something with the cash. If it does not, it itself becomes a take-over target, so it will typically go out and make an acquisition of something in its industry (or maybe not) or some industry it wishes to enter. As an AT&T stockholder I hope that it didn't overpay and actually got a bargain. While this particular buy-out is of local interest due to the involvement of Manchester, there is nothing unique about it. Deals like this go down every week.

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Don Bauder Sept. 4, 2012 @ 7 a.m.

I agree: the worst way for a company to grow is by acquisition. This has been proven time and again by the acquisition-minded companies, like the collapse of the conglomerates of the 1960s and 1970s. Several studies have shown this. Overwhelmingly, the best growth is internal growth. Best, Don Bauder

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Twister Sept. 5, 2012 @ 3:37 p.m.

HOO--RAY! Right ON!

Now tell us about the damage the hollowers do. "Paper millionaires," the CEOs I knew (before they were called CEOs) used to say dismissively and contemptuously. Terminate the termites?

dbauder Sept. 4, 2012 @ 7 a.m.

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Don Bauder Sept. 5, 2012 @ 6:44 p.m.

Good idea: terminate the termites. U.S. business would be much better off. Best, Don Bauder

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Twister Sept. 5, 2012 @ 3:39 p.m.

Except the real ones that make didgeridoos possible.

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