Cramer Finds Globalstar, Inc. Too Risky

Jim Cramer shared with the viewers of CNBC's Mad Money his analysis of Globalstar, Inc. (NYSEMKT:GSAT) on Friday.In July, he recommended the stock as a buy and it turned out that it was trading at its top. Now, when it is trading significantly lower he decided to confront arguments of bulls and bears to see what to do next. Cramer concluded that bears have better arguments and he wants to stay away from this name. Globalstar, Inc. started its down turn after Kerrisdale Capital Management decided to share with the public its short position in this stock. Cramer explained that the hedge fund claims that company's core business can't support its debt load. There is also a problem with Globalstar, Inc.'s intentions to build a fast network of Wi-Fi hotspots. Kerrisdale Capital Management team believes that there is more than enough Wi-Fi spectrum capacity and that there won't be demand for the hotspots even if the company gets an approval from FCC to use spectrum intended for satellite communications for terrestrial use. Globalstar, Inc. claims that demand won't be a problem and it will be able to charge for access to hotspots. The company is planning to offer the service through a simple downloadable software. Cramer added that the CEO is aggressively buying the stock, which is a sign of faith in the business he is running.Cramer is concerned about Globalstar, Inc.'s balance sheet because it looks like that the company is going to be in violation of its covenants. That has already happened in the 1H but the company managed to raise capital and it avoided default. Cramer thinks that more dilution might be ahead and he would stay away from the stock.