Since last Friday, shares of the satellite television and wireless operator EchoStar (SATS 2.01%) had blasted nearly 48% higher as of Thursday, a day in which the market is closed due to the observance of Juneteenth. The stock rocketed higher after media outlets reported that President Trump has encouraged the company and the U.S. Federal Communications Commission (FCC) to make a deal and end their dispute.

A complex regulatory battle

EchoStar owns several satellite, phone, and television companies, including Boost Mobile, HughesNet, Dish, and Sling. The company and its subsidiaries also own spectrum licenses, which grant it approval to use parts of the electromagnetic spectrum, which is critical for operating and providing various forms of wireless communications.

Image source: Getty Images.

Earlier this year, the FCC said they were investigating whether EchoStar is complying with the necessary federal laws to keep its spectrum licenses that it needs to build out its planned 5G internet service in the U.S. In response, EchoStar decided to not make interest payments on some of its bonds, which gave the company 30 additional days to make payments, in hopes the FCC would finish its review. These events led some to believe the company may ultimately default on the payments and enter bankruptcy.

Trump’s intervention and the administration’s deregulatory approach has likely made some investors think a deal will be made. Bloomberg also reported earlier this week that FCC Chair Brendan Carr told EchoStar to sell some of its spectrum licenses or potentially lose them.

Lots of potential outcomes

UBS analyst John Hodulik said in a research report earlier this week that the spectrum licenses could be worth as much as $35 billion. The stock only trades at a roughly $7.2 billion market cap. There’s also big upside if EchoStar ends up succeeding in building its wireless network.

However, investors should keep in mind that regulatory battles like this are often unpredictable. This is a risky bet, so I wouldn’t make it a core position. But if you want to take a chance, make sure you only invest what you can afford to lose.

President Donald Trump has reportedly intervened in a dispute between EchoStar (SATS 48.16%) and the Federal Communications Commission (FCC), urging the two sides to come together and work out a deal. Absent a resolution, EchoStar was said to be considering a bankruptcy filing.

Investors are understandably excited by the latest development, sending EchoStar shares up 40% as of 10 a.m. ET.

Image source: Getty Images.

Walking back from the brink

EchoStar is a satellite television and communications company that’s building a nationwide cellular business under the Boost Mobile brand. However, that network rollout requires a lot of spectrum, and the FCC is displeased with the speed at which that spectrum is being deployed.

There’s at least the potential for the FCC to seize some or all of the spectrum and allocate it to others who have clamored for access, including SpaceX. In response, EchoStar was said to have been considering a bankruptcy filing, which caused the company’s shares to plummet last week.

According to Bloomberg, Trump has reached out to EchoStar Chairman Charlie Eagan and FCC chair Brendan Carr to urge the two sides to come to a deal that would allow EchoStar to avoid a bankruptcy filing.

Is EchoStar stock a buy?

The latest report is good news for EchoStar shareholders, but the company isn’t out of danger yet. A deal could involve EchoStar selling some of its spectrum licenses, which could put Boost at a long-term disadvantage. Alternatively, the two sides could fail to reach an agreement, which could cause the stock to give back Monday’s gains.

Investors considering buying the stock today should keep those risks front of mind and limit EchoStar to a small part of a well-diversified portfolio.