Institutional investors have unloaded their holdings in Globalstar in a telling sign that they expect the company ultimately to file for bankruptcy, a panel of industry analysts have said.

The satellite telephone company’s slow start in gaining subscribers, heavy financing requirements, expiring $250 million (E267m) line of credit at month’s end and high operating costs pose daunting burdens, the analysts said. One of the Wall Street satellite analysts to maintain a “buy” rating on the stock is Robert Peck, of Lehman Brothers, who acknowledged that the sentiment from institutional investors is that Globalstar is “going bankrupt.”

At $6 a share, down from nearly $50 a share in early January, Globalstar is trading “like an option now,” Peck told more than 150 attendees at the IIR’s 5th Annual Satellite Finance conference. The stock could triple in one day, if Globalstar signs a major contract with a new customer, or it could go to zero as early as November, he added.

Mac Jeffery, a spokesman for Globalstar’s dominant investor, Loral Space and Communications, said in a follow-up phone interview that the fledgling satellite phone service’s financial outlook is not nearly as bleak as the Wall Street analysts and institutional investors suggest. Globalstar has many advantages, compared with Iridium LLC, which filed for bankruptcy last August, he added

However, Wall Street clearly seems unconvinced. Armand Musey, a satellite analyst with Bank of America Securities, said, “I don’t know any institutional investors that still hold Globalstar.” Retail investors are the ones hanging onto the stock now, he added.

“There is no question the market assumes that Globalstar is dead,” said Joseph Arsenio, managing director of applied technologies for Chase H&Q. “We’ve been a pretty strong bear on Globalstar for awhile,” said William Pitkin, a satellite analyst with Merrill Lynch.

One reason for the struggles of Iridium and Globalstar in the mobile voice services market is that they require marketing effectively to consumers, whereas the industry’s heritage is to sell satellites and services to governments, Pitkin said.

In Arsenio’s view, Loral could afford to invest up to an additional $200 million to keep Globalstar operating until the first quarter of 2001. Despite assurances that Loral would not let Globalstar fail, Arsenio speculated that Loral Chairman Bernard Schwartz might have second thoughts, especially if such a bail out would put Loral at risk.

Globalstar faces a financing challenge this month, but Jeffery said the company will find a solution one way or another. “A Chase Manhattan revolving loan of $250 million is due at the end of this month that may or may not be renewed,” Jeffery said. “We haven’t drawn from it, so there is essentially nothing to pay back. That loan doesn’t represent a sudden new liability for us.”