The Profitless Wonder

When the stock of the Communications Satellite Corp. went on the market six months ago at $20 a share, demand for it was so great that brokers rationed it to 50 shares or less per customer and only the favored few got their piece of space. But professional Wall Streeters generally stood aloof, willing to sell it but not so willing to buy. Comsat might become the bluest of space-age blue chips, they said, but that was many profitless years away.

The professionals failed to assess prop erly the romance of space and, as a result, vastly underestimated Comsat's continued attraction for investors. The stock has been rising almost steadily for three months, and last week it soared in a speculative orbit all its own.

Flabbergasted Street. Opening on Monday at 55 1/2, Comsat danced all over the tape as the week's most active stock, then closed on Friday at 64 5/8. The flood of buy orders twice forced the Stock Exchange to delay Comsat's opening, and trading once had to be suspended for two hours. The Federal Communications Commission ordered an "informal" inquiry to make sure that in the speculative rush foreign ownership had not exceeded its 20% legal limit. The stock hit a record high of 66 1/4 after Comsat announced plans to start the first commercial service between North America and Europe next May with its "Early Bird" satellite. Wall Streeters were still flabbergasted. "It would have been unpatriotic to expect it to go down," said Merrill Lynch

Vice President La Rue Applegate, "but we never expected this run up." One big reason for the run up is the stock's short supply. Half of Comsat's 10 million outstanding shares have been held from the start by 163 U.S. communications companies; the others are held by more than 200,000 individuals, most of whom still own fewer than 50 shares each and who show little inclination to part with them. Mutual funds and insurance companies have been grabbing large blocks when they could.

The Street had expected many of the initial investors to cash in their capital gams as soon as they crossed the six-month tax divide, thus causing a big sell-off and falling prices. Professionals thus sold an estimated 100,000 shares short, borrowing the stock to sell at a high price and figuring to repay it at a lower price. But after Dec. 3, the first date on which investors could take capital gains, the price went higher in stead of lower, forcing short sellers to scramble to cover their losses and sending the stock even higher. Many bro kers, fearing that Comsat could be riding for a fall, got on the telephones last week to warn their customers away.

Risk-Filled Infancy. The Comsat corporation, whose officers are understand ably nervous about the fast rise and anxious not to encourage it, is still not expected to take in a dime for another six months, or show a profit or declare a dividend for at least four years It has not even decided how much to charge for its services; rate schedules will be submitted to the FCC by Feb 1 Though Comsat had hoped to own the series of ground stations to transmit satellite signals, the FCC announced last week that it will also consider customer ownership; Comsat must await a ruling on this matter before it can set up any stations. And not until after next May's "Early Bird" tests can Comsat choose which of three possible satellite systems to use in its network Only when that decision is made, probably late next year, will Comsat be set to push on toward putting a full global communications network into operation by the end of 1967.

Despite all these risks and doubts and delays, investors in Comsat are obviously hoping that they are getting in on what will be the A.T. & T. or the G.M. of the future.

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