Leap Wireless International, Inc.
Thesis
Leap Wireless is a distressed equity trading at around $6 per share, representing a small fraction of its total enterprise value. The investment thesis is based on the belief that the liquidity profile is decent enough to limit downside risk, and the assets should create enough value for the bank debt to recover to par. The market has been overly cynical about the company's operational recovery, presenting a potential upside.
Did it work?
The long thesis argued that liquidity would limit downside and that the market was overly cynical about Leap Wireless's operational recovery, setting up upside from a re-rating of the equity. Instead, the stock declined 26.6% over the ~12 years since the pitch — the loss was contained rather than a wipeout (loosely consistent with the downside-protection claim), but the anticipated upside never materialized and the equity lost value outright. With more than a decade elapsed, far beyond any plausible distressed-equity horizon, the negative return on a long thesis marks it as failed.