EchoStar (ECHO): $24.12 EPS Came From A Bankruptcy. Is ECHO a Buy?

EchoStar Corporation (ECHO) Q2 2026 — Reported August 3 (Q2 2026, the three months ended June 30, 2026). Total revenue $3.576B, DOWN 4.0% from $3.725B. Diluted EPS $24.12 and net income to EchoStar of $8.462B — but $9.729B of the $9.790B of pre-tax income is a NON-CASH deconsolidation gain booked when DISH DBS and DISH Wireless filed prepackaged Chapter 11 on June 30. Strip it out and pre-tax income was $61M. On August 2, a THIRD subsidiary — Hughes Satellite Systems — filed its own Chapter 11 in Houston. The stock closed at $85.04, UP 1.1% from an $84.09 close, having traded $83.04 to $88.32. Ticker changed from SATS to ECHO on May 26. The subtraction nobody ran on air: pre-tax income was $9,790.114M and the deconsolidation gain was $9,728,958 thousand — so the entire operating business, four segments and roughly 14 million subscribers, earned $61M pre-tax on $3.576B of revenue, a 1.7% margin. And that $61M still contains a full quarter of DISH Pay-TV, which produced $600.7M of adjusted OIBDA and left the company on June 30. First-half free cash flow was $2.590M. THE CALL: HOLD (3/5, A GREAT TRADE, ALREADY IN THE PRICE.) — base-case value ~$82.0 vs ~$85.04 today. KEY METRICS: - CALL: HOLD 3/5 — fair value ~$82 vs $85.04 (about 4% BELOW). A SUM-OF-THE-PARTS, not a DCF, because Q2 GAAP earnings are a $9.729B non-cash accounting entry, first-half free cash flow was $2.590M, and two of the four segments are now in bankruptcy court. THE BUILD, on 348.5M fully diluted shares (290,451,972 outstanding at 6/30/26 plus ~58M from the 3 7/8% converts): cash after the AT&T close $12.01B + SpaceX stock $11.10B (261.8M shares at the fixed $42.40) + remaining spectrum at carrying value $8.45B + Boost Mobile ~$1.02B (5x annualised adjusted OIBDA of ~$203M) + other investments $0.21B, LESS residual debt and leases $0.21B, deferred tax liabilities $3.41B and an estimated $0.60B of holdco burn to the SpaceX close = $28.6B, or ~$82/share. Range $60–$104 across the two marks we cannot verify. - THE EARNINGS ARE AN ACCOUNTING ENTRY: pre-tax income $9,790.114M less the $9,728.958M deconsolidation gain = $61.156M — a 1.7% pre-tax margin on $3,576.164M of revenue. Note 3 explains it: on June 30 DISH DBS Corporation and DISH Wireless L.L.C. and their subsidiaries filed prepackaged Chapter 11 petitions in the Southern District of Texas, the Bankruptcy Court assumed control, and under ASC 810 EchoStar deconsolidated them. Those entities carried $11,427.038M of NET LIABILITIES; EchoStar's retained equity in them was marked at $0 because their liabilities exceeded their assets. The gain splits $5,209.671M (DISH DBS) and $6,217.367M (DISH Wireless) less a $1,513.571M deferred tax adjustment, $133.196M of credit-loss allowance and $51.313M of parent guarantees. The 10-Q states it is non-cash AND not currently taxable. - WHAT ACTUALLY CONTINUES IS ROUGHLY MINUS $20M A QUARTER: Q2 consolidated adjusted OIBDA was $681.195M (vs $279.647M). Of that, $600.656M is Pay-TV, DECONSOLIDATED June 30. $100.199M is Broadband & Satellite (Hughes), which filed Chapter 11 on August 2. Wireless/Boost contributed $50.760M (a genuine swing from -$98.909M) and the abandoned 5G 'Other' segment cost $71.129M. Segment revenue: Pay-TV $2,248.5M, Wireless $929.0M, Broadband & Satellite $316.9M, Other $91.5M. Subscribers at 6/30/26: Pay-TV 6.391M (DISH TV 4.684M, SLING 1.707M), down 241k in the quarter, ARPU $112.39; Wireless 7.375M, DOWN 118k net after ADDING 212k a year ago, gross adds -20.5%, ARPU $38.60 (+3.2%), churn 2.88%; Broadband 622k, down 24.1% year over year. - THE SPECTRUM LEDGER: AT&T CLOSED, SPACEX HAS NOT. On July 28, 2026 AT&T paid $20.250B in cash for all the 3.45 GHz and 600 MHz licences plus a 99-year Hawaii lease extension; those licences were carried at $16,822.253M. The FCC mandated $2.4B of it into a Wireless Creditor Trust. SpaceX has agreed to pay approximately $20B for the AWS-4 and H-block licences (50 MHz) plus 15 MHz of AWS-3, with up to $11B paid in 261.8M SpaceX Class A shares at a fixed $42.40 after May's 5-for-1 split; the Spectrum Transfer Closing happened May 22, 2026 but the SPECTRUM ACQUISITION CLOSING IS TARGETED FOR NOVEMBER 30, 2027. SpaceX is funding ~$2B of interim debt service on the $9.821B of Seller Notes in the meantime ($828M booked at 6/30/26). EchoStar still owns $8,449.478M of spectrum at carrying value, and has invested over $30B in licences plus $10B of capitalised interest. - THE CASH BRIDGE AND THE CONTROL QUESTION: cash was $439.988M at June 30 — which is precisely why HSSC, facing $627.283M of 5 1/4% and $750.0M of 6 5/8% notes maturing August 1, 'does not currently have the necessary cash' in the 10-Q's own words, and filed on August 2. Post-AT&T: ~$0.50B of cash and securities + $20.25B, less $2.40B into the FCC trust, less $3.50B redeeming the 11 3/4% notes due 2027, less $2.844B paid to DISH DBS on the 2021 intercompany loan = ~$12.0B. Total debt and finance leases were $17,431.703M at 6/30/26; deferred tax liabilities $3,406.850M. Charles Ergen holds all 131,348,468 Class B shares against 159,103,504 Class A, and the 10-Q's own risk summary says 'We are controlled by one principal stockholder who is our Chairman, President and Chief Executive Officer.' There is no announced plan for the $12B, and in ~40 years he has never paid a dividend or run a meaningful buyback. - STREET vs US: seven analysts, consensus rating STRONG BUY (6 strong buy / 1 buy / 0 hold / 0 sell per S&P Global as of August 3), average 12-month target $134.86, median $130, low $115, high $161 — 58.6% above the $85.04 close. Citigroup reinstated coverage July 7, 2026 at Buy with a $126 target. We DIFFER sharply and are far more CAUTIOUS on the number: $134.86 implies $47.0B of equity value; we can source $28.6B from the filings. The $18.4B gap is, near enough, the entire remaining spectrum book re-marked at DOUBLE carrying value, plus a large gain on the SpaceX shares above the fixed $42.40, plus the $3.41B of deferred tax never being paid. What to watch: Bullish: an announced use for the ~$12B of AT&T proceeds that favours shareholders — a buyback, a special dividend or a tender; a third spectrum transaction that marks the remaining $8.449B of licences above carrying value; DISH DBS emerging from the prepackaged plan in 2H 2026 and reconsolidating with real equity value. Bearish: any slippage or renegotiation in the SpaceX Spectrum Acquisition Closing targeted for November 30, 2027 (up to $11B of the consideration is private SpaceX stock at a fixed $42.40); Boost Mobile losing subscribers again in Q3 after shedding 118,000 net in Q2; the $12B being committed to another capital-intensive network build. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.