Cerberus Goes for Satellite Imaging

Chidem Kurdas

GeoEye offers satellite-based imaging to users that range from the US Department of  Homeland Security to oil pipeline operators. Promising though that may sound, GeoEye stock went into a downward spiral in the last quarter of 2011. Meanwhile Cerberus Capital accumulated a large position in GeoEye.

In September GeoEye was fluctuating around $35 a share. Last week it closed at about $22. The conventional wisdom is that the stock is undervalued and should recover in 2012. Presumably Cerberus chief Stephen Feinberg agrees with that assessment.

Over several months Cerberus funds bought the stock at prices that vary from a high of $44 – double the current price – to $21. In December alone the funds bought some 550,000 shares.

On the whole the trade must be losing money so far but Cerberus has been known to hold positions for years. In this case it is not clear what would trigger the recovery but there are possibilities.

GeoEye is recognized as a technological leader in its area; the question is the extent of the market for the product. Mr. Feinberg must believe that the company will be able to get contracts with government and business clients. If it does, then Cerberus will notch a win. But what if it doesn’t?

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