Leap Wireless Shares Jumped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Leap Wireless (NAS: LEAP) briefly rose more than 10% on above-average volume when the company announced plans for a purchase and partnership agreement with Verizon's (NYS: VZ) wireless business unit.

So what: Leap will pay $204 million for 12 megahertz of the 700 MHz wireless spectrum in Chicago even as it sells PCS and AWS spectrum in other regions. Leap expects to realize $100 million from the Verizon transactions, net of fees and debt repayments.

Now what: My guess is the promise of balance-sheet flexibility prompted the early run. Why? Leap has five times as much debt as equity as of this writing. Obligations also consume more than 80% of capital. Any move to reduce those ratios -- even if it comes at the cost of some spectrum -- is a good move. Do you agree? Would you buy shares of Leap Wireless at current prices? Please weigh in using the comments box below.

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At the time this article was published Fool contributorTim Beyersis a member of theMotley Fool Rule Breakersstock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim'sportfolio holdingsandFoolish writings, or connect with him onGoogle+or Twitter, where he goes by@milehighfool. You can also get his insightsdelivered directly to your RSS reader.Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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