BOSTON(Reuters) - Kerrisdale Capital, a small hedge fund managed by Sahm Adrangi who has built a reputation by betting against satellite companies, is taking on ViaSat Inc.'s, declaring its stock should be trading at half of its current price.
In a 57-page report issued on Tuesday, Adrangi said the Carlsbad, California-based company that beams satellite Internet to rural homes provides "inferior technology in a hyper- competitive market." Kerrisdale holds an unspecified short position in the stock.
Investors, Adrangi predicted, will soon realize that the "satellite-based residential internet is a business in terminal secular decline," and push its stock price significantly lower.
According to Adrangi, who gained attention with successful bets against Chinese internet companies, the stock price should be trading closer to $35 a share not $71.63, where it closed on Monday. Since the start of the year it has fallen 1.15 percent but has gained 85 percent over the last five years.
In the $3 trillion hedge fund world, Adrangi's $150 million Kerrisdale Capital is a tiny player that relishes attacking big targets. In October 2014 Kerrisdale unveiled a short bet against $2 billion Globalstar Inc which sent the stock price tumbling 25 percent. Last year, Adrangi bet against direct broadcast service provider DISH Network (NASDAQ:DISH) Co, a move that has not worked out and led to a loss at Kerrisdale.
This time, Adrangi is not just taking aim at ViaSat but also at Seth Klarman's $29 billion Baupost Group, a hedge fund that is ViaSat's largest investor with 13.2 million shares or 22.8 percent.
"What had us scratching our heads about Baupost's involvement is how it has been a top three holding for eight years even as prospects for the business and the competitive environment have been in a constant state of change with the outlook for satellite home broadband worsening each year," Adrangi said in an interview. He did not mention the fund or its manager by name in the report.
Adrangi said the company is trying to disguise its "doomed business" through aggressive accounting tactics like inflating average revenue per user through add-ons like "priority access" customer support."