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Greenberg: Can Iridium Avoid Another Cash Crunch?

SAN DIEGO (TheStreet) -- I was on-air at CNBC Tuesday when one of the anchors asked Jeff Saut, the chief strategist of Raymond James, his favorite stocks.

Jeff, an old friend, immediately said, Iridium (IRDM - Get Report).

To which I said, "I just red-flagged Iridium in a 3,000-word piece on Reality Check."

To which he said, "Ron Baron," of Baron Funds, a well-respected manager, with an extraordinary track record, 'just bought' a lot of Iridium's stock." (Which he did, as part of a recent effort by the company to raise $220 million.)

To which I said, "Green flags and red flags, that's what makes markets."

That is the one thing I don't believe you'll find any disagreement regarding Iridium, or any other company.

In my years of doing this, there is one truism: There are very smart people, who think they know better, on both sides of many stocks. Often they both get it right and wrong, depending on timing. But in the end, one often prevails.

On something like Iridium, it's too soon to say which side will be right.

But to suggest the stock is set for a flawless launch, without even a tinge of hesitation, would be a stretch.

With Iridium, the bears got it right the first time around, in the late-1990s, when Iridium, which makes satellite communications, was one of the great battleground stocks. I affectionately called the company's legendary investment message board fanatics the "Iridiots," as they would hoot and holler at anybody who dared raise red flags over the company's prospects.

They were bolstered in their fervor by Iridium's stock, which zoomed as high as $72 in 1998, giving the company a market value of $1 billion -- on its way to plummeting back to earth in bankruptcy a year later.

The company has since been restructured, reconstituted and publicly re-launched as the only satellite phone company with 100% coverage.

Reality: Iridium is a much better company than it was in its early, pre-bankruptcy days. Satellite communications isn't a fantasy. It's used in specific situations, where regular cell service isn't available, especially in such industries as forestry, oil and gas, mining and maritime.

But one thing hasn't changed: The cost of launching satellites. It's still expensive, and Iridium is on the cusp of launching a new constellation.

Since announcing funding for the new constellation four years ago, the company has insisted multiple times that it is "fully funded," but has needed to raise additional cash at least two times, as growth in its core market has slumped.

The first satellite launch, which has already been pushed back several months, is scheduled for mid-2015. Management says the need to raise additional cash is "unlikely." (CEO Matt Desch's full response can be read in my report in Reality Check.)

Trouble is, for the company not to need yet additional cash, which in all likelihood would dilute investors more than its just-completed funding, everything has to go just right. Given Iridium's history, that would appear to be unlikely.

-- Written by Herb Greenberg in San Diego

Herb Greenberg, editor of Herb Greenberg's Reality Check, is a contributor to CNBC. He does not own shares, short or trade shares in an individual corporate security. He can be reached at herbonthestreet@thestreet.com.

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