Starry still fighting as it faces stock delisting
Starry's star may be fading, but the troubled fixed wireless access (FWA) startup is still fighting as it faces a possible delisting on the New York Stock Exchange (NYSE).
The NYSE alerted the company last week that it has started proceedings to delist Starry's Class A common stock. The NYSE's alert arrived a month after the exchange sent a deficiency letter telling the company it was not in compliance with the criteria to stay on the NYSE. As of November 7, the average closing price of Starry shares had fallen below $1 each over a consecutive 30-trading-day period. Starry shares closed Monday at $0.02.
On December 9, NYSE notified Starry that the company was not in compliance after its average global market cap over a 30-day trading period was less than $50 million and its reported stockholders' equity had dipped below $50 million.
As a result of the NYSE warning, MoffettNathanson (a unit of SVB Securities) suspended its coverage of Starry last week. The firm's previous price target was $3 per share.
Thought MoffettNathanson has argued that Starry's technology and business model has potential, the company "has fallen victim to a vicious 'circular reference' of financing," MoffettNathanson analyst Craig Moffett explained in a research note. "The further their share price fell, the greater the dilution from a potential equity financing… warranting a still further decline in their share price."
Starry said its board is considering whether to appeal the NYSE's decision to commence delisting proceedings. The company now has less than 45 days to advise the NYSE of any "definitive action" the company has taken to bring it into compliance with the exchange's minimum standards.
Starry stressed that there would be "no impact" on customers' Internet service due to the NYSE's actions. "All customer operations continue as normal," the firm stated.
UPDATE: Late Monday, Starry announced it had struck an amended and restated credit agreement with its lenders on December 13 that provides interim loan financing of more than $11 million. The agreement also paves the way for Starry to access additional financing "through an uncommitted accordion debt basket of additional loans of up to $30 million."
"We're grateful to our lenders for the extension of interim financing as we chart the next path for the company," Chet Kanojia, Starry's co-founder and CEO, said in a statement.
Starry is coming off a Q3 2022 in which it added more than 10,347 net new customers, for a total of 91,297. The company also grew its serviceable footprint by 18% year-over-year. Starry said it activated about 50,000 units in Q3, ending the quarter with more than 450,000 activated units.
Starry, which withdrew from the FCC's Rural Digital Opportunity Fund (RDOF) to conserve cash, ended Q3 with $29.4 million in cash, down from $99.7 million at the end of the prior quarter. In October, Starry laid off about 500 employees – about half its workforce – and halted its market expansions.
Short financial runway
Following Starry's Q3 results, the analysts at Cowen estimated that Starry's cuts should give the company a runway through the second quarter of 2023 "at best, as it critically seeks funding. We view STRY's stock as highly volatile … predicated on the very binary event to secure capital (a partial or outright sale)."
A recent agreement with Cantor Fitzgerald enables Starry to raise up to $100 million in capital, or up to 19.9% of shares outstanding, which could offer a short-term fix. Moffett has previously estimated that Starry would need to raise about $600 million over the next three years and up to $1 billion over the next five to fulfill its original plans.
In late October, Starry announced that it had hired PJT Partners to advise it on areas such as M&A and capital raising and the potential to sell part or all of the company.
"There is interest from strategic and financial parties and we hope to conclude the process in as timely a manner as possible," Kanojia said last month on the company's Q3 call. The company had no further comment about funding activities when Light Reading inquired last week.
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- Starry might appeal NYSE's proceeding to delist stock (press release)
- Starry has solid potential, but financing needs fixing – analyst
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— Jeff Baumgartner, Senior Editor, Light Reading