Intelsat Board Chair David McGlade Accused of Insider Trading in Lawsuit 

Intelsat US Administrative Headquarters: Photo: Intelsat

A class action lawsuit has accused David McGlade, former Intelsat CEO and chairman of its board of directors, along with shareholders BC Partners and Silver Lake, of insider trading around the FCC’s decision in November 2019 to hold a public C-band auction. 

The class action lawsuit, filed Jan 14, alleges that McGlade and BC Partners and Silver Lake sold $246 million in stock the same day they learned the FCC turned against a private auction for C-band spectrum. The lawsuit includes testimony from two confidential witnesses — a former Intelsat employee who was a vice president at the time, and a senior executive at the C-Band Alliance who worked closely with Intelsat and SES senior management.

“This is the quintessential insider trading case,” the lawsuit says. “Intelsat, a satellite operator, was successfully pursuing a bet-the-company-deal with the FCC. Its board chairman, defendant David McGlade, and its two largest shareholders, defendants BC Partners and Silver Lake, sold $246 million in stock, the very same day they learned the FCC was turning against the deal.” 

The former Intelsat VP said in the lawsuit that Intelsat CEO Stephen Spengler believed he had a “handshake deal” with FCC Chairman Ajit Pai, that licenses to C-band spectrum would be auctioned off to wireless companies through a private auction, which could generate upwards of $60 billion for the satellite companies. But then, things “started to get weird,” the former VP said, with rumors that Republican Sen. John Kennedy was trying to influence President Donald Trump and Pai toward a public auction, in which proceeds would go to the U.S. Treasury. 

The crux of the lawsuit is a Nov. 5, 2019 meeting between Intelsat and the FCC, and what happened after. Spengler and FCC senior counsel Nicholas Degani attended the meeting, among others. The Intelsat VP was told that during the meeting, FCC officials indicated they would push for a public auction, and those within Intelsat described it afterward as a “turn for the worse.”

Both the former Intelsat VP and the CBA executive said Intelsat began working on a revised proposal for a private auction plan just after the meeting, a plan in which Intelsat would make voluntary contributions to the U.S. Treasury based on the proceeds of the auction. 

Then, during the afternoon and evening of Nov. 5, McGlade and Intelsat’s two largest shareholders at the time — BC Partners and Silver Lake — sold $246 million of stock at a 6.6% discount. Morgan Stanley sent out solicitation emails after markets closed, shopping the deal at a price of $24.50 to $25, lower than the Nov. 5 market closing price of $26.33. 

“The price had to be lower to draw buyers’ attention and allow for a quick sale — indicative of a desperate seller, seeking to offload shares before the public learned of the disastrous meeting that transpired earlier that day,” the lawsuit reads. 

On Nov. 18, 2019, Pai announced that he supported a public auction, and Intelsat’s stock — which had already taken a hit as rumors of the FCC’s change circulated — declined by about 40%. As the stock fell further the next day, the lawsuit says it closed on Nov. 19 at 77% below the closing price on Nov. 5, meaning that the defendants avoided $185 million in losses. 

Intelsat Chairman of the Board David McGlade. Photo: Via Satellite archive/Intelsat

The lawsuit alleges that McGlade, Silver Lake, and BC Partners had direct knowledge of what happened at the FCC meeting because information was “flowing freely” to the board. Both witnesses said Intelsat was keeping the board up to date on C-band negotiations. In addition, the former Intelsat VP said that there was no information blackout in place at the time, a practice Intelsat had instituted in the past when the company made stock offerings, and the Nov. 5 trades were not pre-approved by Intelsat.  

McGlade is on the board, and BC Partners is represented by two company partners on the board, Raymond Svider and Justin Bateman, who are both named as defendants. According to the lawsuit, Silver Lake did not directly have representation on Intelsat’s board, but was entitled to information under a shareholder agreement. 

McGlade has been on the board since 2013. He is a former Intelsat CEO and served as CEO from April 2005 to March 2015. During his time as CEO, McGlade led the acquisition of PanAmSat, and the sale of Intelsat to a consortium of investors led by BC Partners and Silver Lake, and Intelsat’s initial public offering (IPO) in 2013. 

Intelsat declined on Wednesday to comment on the lawsuit at this time. 

The amended class action complaint was filed Jan. 14 in the U.S. District Court for the Northern District of California by counsel for lead plaintiff and investor the Walleye Group. It has been brought on behalf of investors who purchased Intelsat stock on or around Nov. 5, 2019, through Nov. 18, 2019. It calls for a trial by jury, and for compensatory damages and damages equal to the losses the defendants avoided with the stock sales. The lawsuit was first reported on by the New York Post.

This is an amended complaint for lawsuit Silver Lake Group, L.L.C., Securities Litigation, which was filed in April 2020. The lawsuit originally named Silver Lake and BC Partners as defendants, but this amended complaint directly accuses McGlade of insider trading as well. 

After the time period of the lawsuit, the FCC voted in February 2020 to hold a public C-band auction, with $9.7 billion in quick clearing incentive payments to satellite operators divided between Intelsat, SES, Eutelsat, Telesat, and Star One. 

Intelsat later filed for Chapter 11 bankruptcy protection in May 2020, which is still ongoing. The company said in its bankruptcy filing that the company was not able to service its debts while spending money to clear the C-band, when expenses would not be reimbursed until later.  

This amended complaint comes just after the FCC announced the C-band auction is its highest-grossing auction yet, grossing $80.9 billion in Phase One — above expectations.