A significant shareholder in SES, holding over 7% of its economic interests, is advocating for decreased government oversight of the Luxembourg-based satellite operator. Appaloosa, the hedge fund in question, contends that greater independence is crucial for navigating the intensifying competition within the industry. Their recent proposal, made public on February 27th, challenges SES's $3.1 billion acquisition plan for Intelsat—a rival in which Appaloosa also holds a substantial stake—arguing it insufficient to address the existential threat posed by competitors.
Appaloosa, established by billionaire investor David Tepper, further suggests downsizing and regular board refreshment, coupled with a structured capital distribution program, including annual surplus allocation to shareholders. SES has stated it's thoroughly reviewing these proposals, promising a shareholder recommendation at a later date. A spokesperson declined to offer additional comment.
The Luxembourg government holds a special class of shares (Class B), granting it 33.33% voting rights despite owning only 16.67% of the company's economic interest. Appaloosa's news release highlights this disparity: “Perhaps this disparity may have been excused in the past when the satellite industry conducted business as a staid oligopoly of quasi-governmental incumbents shielded from material competitive threats. In the current context, however, the structure is an antiquated relic that disenfranchises shareholders and discourages investors and customers from taking the Company seriously as an authentic commercial enterprise.”
Their solution involves converting Class B shares to Class A shares, maintaining the government's 16.67% stake. They suggest safeguarding government interests—SES's Luxembourg headquarters, fair board representation, and local operations—through targeted bylaw modifications or contractual agreements. Appaloosa asserts: “As a result of these measures, the Government’s legitimate concerns can be addressed but its ability to disproportionately influence the Company’s business affairs curtailed. Ultimately, modernizing the Company’s capital structure to conform with international standards will contribute to SES’ continued viability and inure to the benefit of both public shareholders and the Grand Duchy of Luxembourg.”
This challenge to the government's role in SES coincides with Luxembourg's expanding space ambitions, including the Space Resources initiative focused on asteroid mining. Facing competition from SpaceX’s Starlink, and with shares trading below COVID-era lows, Appaloosa believes SES needs to transition from a government-linked model to a more nimble, commercially driven approach.
While SES maintains stable financial projections, Moody’s downgraded its outlook from stable to negative on February 18th, citing competitive pressures and revenue uncertainty. Despite this, SES reported €2 billion in 2024 revenue, slightly down year-on-year but within projections, with adjusted EBITDA increasing to €1.03 billion. SES anticipates stable revenue and adjusted EBITDA for 2025, pending the Intelsat acquisition's completion in the second half of the year.