Clearwire Corp. (NASDAQ: CLWR) is absolutely surging today on news that it will likely have to be a part of a Sprint Nextel Corp. (NYSE: S) majority stake sale to Softbank in Japan. While the deal remains murky and while the confirmation by Spring that it is in fact in talks with Softbank, there is still no assurance that a deal will be consummated.

We have taken a look here to see what is happening with Clearwire to try to determine just what sort of price a buyer would have to pay to secure a shareholder vote. With Clearwire stock up over 50% at $1.95, the most obvious answer might be "at least $2.00" but that is not the case.

Clearwire hit a high of $2.05 today but its 52-week trading range is $0.83 to $2.64. Softbank or any other pre-designated buyer will not be obligated to pay a premium to the "after the news pop" so long as they can secure a vote. That being said, longer-term shareholders may fight for more. Perhaps the biggest consideration is what the options market is telling you. By our measurement the options prices are telling us that a buyout price as of today is probably being valued at closer to $2.30 or maybe $2.35.

We have seen over 100 million actual shares trade hands today. There have been only about 8,000 of the $2 OCT-2012 Calls traded today. Those expire on October 19, so perhaps the November or longer contracts matter the most. With a premium of $0.20 the implied buyout price would be $2.20 or so if it happens now, but we are looking at more time value than 8 days.

The November $2 calls have traded 6,000 contracts and these last traded at $0.30, implying that options traders do not believe a buyout price north of $2.30 is likely. Even in the $2 December calls, the last was at $0.35 and that gets you to $2.35 as the Maginot Line.

The reality of all of this is that this is based upon a snapshot rather than on knowing what the traders actual books look like who have been trading around Clearwire. The good news is that Clearwire is not exactly the most active when it comes to options trading due to it already trading at $1 or $2 per share lately.

Our take is that options traders are pegging an implied max value of about $2.30 or maybe $2.35 for an implied buyout price of Clearwire. The reality is that a real buyout price could be far higher or far lower. The equity market value of Clearwire is barely $1 billion as of now, but that $4.2 billion-plus in long-term debt is the wild card. The most obvious ambition for any Clearwire purchase (and maybe Sprint as well for that matter) here is the wireless and 4G spectrum.

JON C. OGG


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