Clearwire Tumbles on Plan to Raise $350 Million in Stock Sale

By Scott Moritz and Tom Giles - Dec 8, 2011 9:45 PM GMT+0700

Clearwire Corp. (CLWR), the money-losing wireless broadband provider, tumbled after saying it will raise $350 million in an equity offering to help cover costs and improve its mobile network.

The company will sell 175 million Class A shares at $2 apiece in an offering expected to close on Dec. 13, an increase from earlier plans to raise $300 million, Bellevue, Washington- based Clearwire said yesterday in a statement. Sprint Nextel Corp. (S), which owns a majority of the economic interest in Clearwire, also will buy about 172 million shares of the company’s Class B shares in a separate transaction.

Clearwire dropped 6.6 percent to $2.13 at 9:38 a.m. New York time, after falling as much as 10 percent. The stock had slid 56 percent this year before today.

Clearwire will use the money to build out a higher-speed Long-Term Evolution, or LTE, wireless network and pay other operating expenses. The financings may dilute the value of Clearwire’s existing stock, depending on the price of the offerings, John Hodulik, an analyst at UBS AG, said this week.

At $2 a share, the offering “would dilute existing shareholders by about 33 percent based on Clearwire’s 915 million shares outstanding,” Hodulik said in a research note.

Clearwire last week said it’s extending a network-sharing deal with Sprint valued at as much as $1.6 billion over the next four years. Overland Park, Kansas-based Sprint buys wholesale wireless capacity from Clearwire and then resells the service to its own customers.

The equity offerings and the deal last week, which came after a standoff over how the two companies would work together when their current network agreement expires at the end of 2012, gives Clearwire more stable finances, Jonathan Chaplin, an analyst at Credit Suisse Group AG, said this week.

Clearwire also said yesterday that it’s granting underwriters a 30-day option to purchase as much as an additional $52.5 million of Class A common shares.

To contact the reporters on this story: Scott Moritz in New York at smoritz6@bloomberg.net; Tom Giles in San Francisco at tgiles@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net.