PanAmSat Shares Plunge on Failed Satellite Launch
PanAmSat Corp. stock fell as much as 17% after a Boeing Co. rocket exploded following takeoff Wednesday night at Cape Canaveral, Fla., destroying PanAmSat’s Galaxy X telecommunications satellite.
Shares of PanAmSat, which is 81%-owned by General Motors Corp.’s Hughes Electronics division, plunged $7.31 to close at $42.25 on Nasdaq trading of 417,200, more than twice the three-month daily average. The drop reduced the firm’s market value by $1.09 billion, which lowered its current estimated value to $6.3 billion.
Boeing’s Delta III rocket, carrying the Galaxy X communication satellite built by Hughes Space & Communications Corp., was to have been the first of its kind to go into space.
Although the $225 million that PanAmSat spent to build and launch the satellite is covered by insurance, the loss will force PanAmSat to defer revenue that would have come from leasing the satellite, PanAmSat said.
The company is expected to lose about $200 million in revenue this year, said Roger Threlfall, an analyst at J.P. Morgan Securities who rates the shares a “buy.”
Greenwich, Conn.-based PanAmSat had planned to lease the satellite to television broadcasters and telecommunications companies such as General Communication Inc., MCI Communications Corp. and units of Hughes, a company spokeswoman said.
The financial impact of the loss is expected to be limited to the fourth quarter, said company spokesman Dan Marcus, who called the effect on revenue significant.
The explosion isn’t likely to affect the company’s projected results for 1999, Marcus said. PanAmSat is expected to earn $1.81 a share in 1999, the average estimate of seven analysts polled by First Call Corp.
The explosion won’t have much financial effect on Boeing, the world’s largest aerospace company, analysts said. The company must give PanAmSat a free launch as compensation, which costs Boeing about $75 million based on a selling price of $85 million, said Paul Nisbet, an analyst at JSA Research Inc.
Shares in Seattle-based Boeing fell 50 cents to $35 on the NYSE.
