Iridium wasn't some fly-by-night penny stock with no product and hucksters for a management team...
But that didn't save it in the end.
While Iridium's goals were ambitious, they sounded achievable enough. The company developed satellite phones that would let folks make calls from the furthest corners of the Earth.
The phones worked through a constellation of 66 satellites that launched in the late '90s. The project itself was backed by Motorola – already one of the world's biggest telecom companies – and its countless patents.
And Iridium's widely respected CEO, Edward Staiano, had worked at Motorola for more than 20 years.
In September 1998, the company issued numerous press releases touting its state-of-the-art tech. It boasted that 2,000 handsets were being rolled out in government, corporate, and individual settings.
It highlighted deals with the U.S. State and Defense departments. It touted contracts with well-known companies like Shell, Exxon, and Monsanto.
The stock peaked above $70 per share in the ensuing mania.
Then, the service actually launched.
It didn't take long for problems to show up...
The brick-sized phones didn't work inside buildings. They needed a clear line of sight to the skies in order to connect.
Said another way, they were basically useless in the urban jungle of Manhattan... or any other developed area.
Iridium had promised 40,000 customers. By December 1998, it had sold between 6,000 and 8,000 phones.
But instead of walking back its claims, Iridium doubled down. Management insisted the company would get to 500,000 subscribers by the end of 1999.
Wall Street fell for it. Some analysts believed Iridium could break even... or even turn cash-flow-positive by early 2000.
The reality was quite different.
A month after it made those big, bold promises, Iridium had another bit of news for investors...
It was going to miss its first-quarter targets... badly.
Even worse, that would put it in default with the lenders from whom it had borrowed to finance its $5 billion build-out.
By August 1999, Iridium had defaulted on more than $1.5 billion in bank loans and was seeking Chapter 11 bankruptcy.
Shares fell from around $70 to just above $3 as big promises met a cold reality... Even great technological innovation can fail against a market that doesn't need it.
And that's a bad business plan.
It's not that Iridium's tech was useless...
The U.S. government even stepped in post-bankruptcy to help save the constellation of satellites.
And after emerging from bankruptcy, Iridium Communications (IRDM) still exists as a public company today.
But leadership didn't do investors any favors when it refused to face the music. And when everything started to fall apart, those same folks were left holding the bag.
Today's stock market has plenty of great companies. But odds are, it has a few '90s-era Iridiums, too.
Our budding technologies might look a bit different. Companies are trying to make it big in AI, small nuclear reactors, autonomous drones, and quantum computing.
Many are legitimate businesses with the numbers to back them up. But some, in all likelihood, are just stringing investors along until the other shoe drops.
It's natural to want to buy the next big thing. Just make sure you're investing in the best business... rather than the best story.
Regards,
Joel Litman
January 22, 2026
