Latest / AST SpaceMobile Podcast / Anpanman - Let's discuss Scotia's downgrade, which was basically spoon fed by HF short clients

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Anpanman - Let's discuss Scotia's downgrade, which was basically spoon fed by HF short clients · AST SpaceMobile Podcast

0:06
This is the AST Space Mobile podcast.
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Listen, the opportunity that we have is very, very, very large.
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Everyone, thanks for joining. I'm I'm in my car because I'm at
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a son's soccer practice and I'm waiting outside.
0:34
So I figured I have been an hour's worth of time.
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So I figured I'd do the space this evening, but give me a
0:41
thumbs up if you can hear me. It's I want to make sure I've
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had problems with in the past doing this from the car because
0:49
the I guess like sometimes it connects to the car or connects
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to my iPods. But let me just see make sure
0:56
that people can hear me. OK.
1:01
I see a thumbs up. So yeah, pretty crazy day.
1:07
We had this overnight downgrade from from Scotia.
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And I just wanted to talk a little bit about that downgrade.
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Some of the content that's within it that's you know, was
1:17
in the the report that I guess LED this this analyst Andres to
1:22
downgrade the stock from a valuation perspective.
1:25
But you threw a bunch of stuff in there, but then also talk a
1:29
little bit about the dynamics of sell side research and in
1:32
particular Scotiabank and this analyst in particular.
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So maybe I'll just start by saying that the way these
1:41
investment banks are set up, sell side research is a tool.
1:45
It's just a, a, you know, a tool that, that investors use,
1:51
whether it's institutional retail, but it's kind of a, you
1:55
know, sell side research is, is a conduit for information.
2:00
The where a research analyst, if they're good, they actually
2:04
provide unique insights. They do evaluation work.
2:07
And if they're good, they're independent and they obviously
2:11
make calls. Hopefully you get them right.
2:14
And then, you know, from that perspective, they build up a
2:16
reputation and, and in an ideal world, you have institutional
2:21
clients that like speaking to a particular analyst and getting
2:25
their insights, you know, beyond what's published, they might do
2:28
calls with them and, and they'll pay for that.
2:31
They'll pay for it in a number of ways.
2:33
It can be hard, hard dollars or soft dollars, but usually it's
2:36
just commissions. And so when I was at a hedge
2:39
fund, you know, I would, if I like particular analysts and I
2:45
thought they provided value add, then I might direct trades to
2:49
them and generate commissions and that's how I'd pay them.
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And so analysts kind of serve, you know, they, they kind of
2:57
have to balance things because they also, you know, obviously
3:01
interface with the investment banking side, they help
3:04
facilitate, you know, capital markets transactions.
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And so, you know, they, they do want to, to the extent possible,
3:12
they do want to manage their relationships with, with the
3:15
companies that they're covering. Like they don't want to get shut
3:18
out and they want to have some type of rapport with management
3:22
because in the future there could be, you know, investment
3:26
banking fees, whether that's, you know, raising credible
3:29
bonds, equity debt. Often times a company, you know,
3:34
when they engage with the bank, they will they will select banks
3:37
based off of their execution. It might be entailed also, you
3:40
know, research coverage, you know, whether that's coverage is
3:44
good or bad, you do need research coverage because that
3:47
generates institutional interest.
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Because, you know, often times when, when investors first want
3:54
to learn about a company, you know, they'll, they'll obviously
3:57
look through company filings, go through transcripts, earnings
4:00
calls, but they're also look at research reports because the
4:04
street, even though everyone likes to poo poo the street, you
4:07
know, research analysts, they, they are important because they,
4:10
they form what is called consensus.
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And so when they do their projections, they, they, they,
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you know, project out estimates and then those estimates are all
4:20
aggregated and form what is consensus, whether that's first
4:23
call or Bloomberg, you know, a, an average of estimates, which
4:27
then companies, of course, like, you know, on a quarterly basis,
4:31
they will either beat meet or or come under estimates for that
4:36
particular quarter. And then obviously people will
4:38
look for guidance, whether it's the next quarter or full year
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guidance. And so, so yeah, analysts do
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play an important role in Wall Street and, and some are good,
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some are bad. And in particular, this analyst,
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what's interesting is that Andres actually started writing
4:55
about AST space mobile. I guess it was like in 2020,
5:00
two, 2021 and he kind of wrote it wrote about AST from a
5:05
tangential perspective because he actually is the Lat Am.
5:09
He covers Latin American M and OS and tower companies.
5:13
And so he started writing about AST kind of out of interest that
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he probably has. I mean, maybe got some exposure
5:21
through a bell or, or somebody, I don't know, but he didn't
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actually cover the company. So he, he wrote about the
5:27
company because it was in his view was going to impact the
5:31
players in Latin America. So, so these tower companies
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like he, he wrote several pieces where it's like, hey, these,
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these tower companies are going to get hammered eventually
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because ASTS technology is game changing to the point where, you
5:43
know, aminos aren't going to spend CapEx.
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And so you know, this, this technology is going to be that
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disruptive where not only, you know, tower companies are going
5:54
to get disrupted because there's not going to be the CapEx needed
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to spend on, you know, tower expansion, But then also M and
6:02
OS, like the M and OS who have this service are going to, this
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was part of the thesis that I wrote about back in 2021.
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But this service is kind of like a key maker, right?
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Like if you can offer your customers 100% broadband
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coverage and you're offering that to a subscriber base
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versus, you know, another M&O that can't offer that, then that
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would be a huge competitive advantage.
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It was like, and about, you know, reference this example
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too, but it, it was like, it's like akin to AT&T selling the
6:34
iPhone when they had the exclusivity for several years.
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Like AT&T took a tremendous amount of share from Verizon and
6:41
T-Mobile because everybody wanted an iPhone.
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And and AT&T's network, frankly, back then wasn't geared to
6:48
handle all that date, all the data demands from the iPhone.
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And so that was like a pretty interesting time.
6:54
But but to the extent that carriers had exclusivity with
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ASD Space Mobile, that that was going to be a big competitive
7:01
edge. And so so yeah, this guy was
7:03
like pretty early and he was very bullish on the name.
7:06
And over the years, eventually, you know, he also leveraged
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Space Mob research, you know, referenced base mob quite a bit
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and candidly, like there's been a few of us who've interacted
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for them. But then, you know, it's and
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then, you know, finally initiated coverage on the
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company, which is good for Scotia bank from a commercial
7:27
perspective, because they they did participate in some of these
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financings. And you know, they they were not
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they weren't lead arrangers, you know, joint.
7:35
They weren't book runners for the equity offerings were
7:38
converts, but they were or the ATMs, but they were, you know,
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Co managers, you know, smaller, smaller managers.
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They got paid some amount. But over time, what was
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interesting is that this analyst, you know, adding up, he
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was, was quite bullish. He had like the highest price
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target on the street. And then I think over the
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summer, over this past summer, clearly like whether they were
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short sellers or also people who own Starlink, ever SpaceX, you
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know, private shares and there's quite a few people who who own
8:13
SpaceX shares, they actually short Rocket Lab and HD Space
8:17
mobile as kind of a sector hedge.
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But clearly, like a number of these people got to him, right?
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And they turned him and and I heard this from like a few
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people who who have had conversations with him where his
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tone completely it was like an overnight change, right?
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Like in June when he came out that negative report and
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downgraded the company went from buy to I think it was like sell
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actually maybe it was. Yeah.
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And then and then, yeah, it was a buy to sell because the stock,
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you know, the stock had was performing well and then it is
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sell. But then but then he went to
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when it did eventually pull back, he went to underweight
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because he's like, Oh yeah, the valuation is cooled off.
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And then he went back to sell. Obviously now.
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But it's interesting because like when you went negative, the
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talking points that he had, all the bullish shocking points like
9:06
went out the window and then all of a sudden he was is basically
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repeating the same shit that we've been seeing from these
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these harebrained short sellers for the last five years.
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Like, I mean, if you look at the report today, it's basically the
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same stuff, right? Like, like I think Bo Bo Anthony
9:24
Boza over at Lakewood says the same thing.
9:27
It's like, oh, well, Starling's going to crush these guys and
9:29
it's going to be game over and there's going to be no breathing
9:31
room for anybody. And it's like, guys, this is a
9:34
duopoly, like there's no, it's not going to be winner take all
9:36
market. No one's ever said that.
9:38
And yeah, Starlink has gotten 650 satellites up in space.
9:42
They got a minimally viable product out in space.
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And it's, and it sucks. It's a piece of shit.
9:48
Like it does texting and it can't do voice over LTE like
9:54
through these like dumb down apps.
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It can do some some amount of like data and messaging, but
10:01
it's not broadband, right. And then and of course, like,
10:04
you know, SpaceX comes out and says, hey, well, we're going to
10:07
sell you a bill of goods market like because we're raising a
10:11
shit ton of money, we're going to go public because we really
10:14
need the money. Like, you know, one of the
10:17
things is it's kind of funny is like people assume that SpaceX
10:19
has money come out of their ears.
10:20
They don't. If they did, they wouldn't have
10:23
paid Echostar SpaceX stock. They would have just paid them
10:25
all cash. Like, why would you dilute
10:28
shareholders and issue stock to echo star and let them ride
10:31
right The ride the upside, you would just pay them cash, but
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they didn't because they didn't have cash.
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And so, you know, obviously, like Starlink has scaled up and
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it does generate cash, but it's not as if you know, when you
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blow up like several starships every few months like that cost
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money. And so, so anyway, like the this
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whole idea where I think Mach 33 and you know, I respect those
10:58
guys. Like they're, they're long
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SpaceX and you know, they're, they research, they, you know,
11:03
they're just like us, right? Like they, they talk their book
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and, and I think what was it? SpaceX recently put out this
11:12
annual record and they talk about like V3.
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It's going to be, it's like the next, it's the biggest thing
11:17
since sliced bread. Like the satellite's going to
11:19
perform and I guess I'll go into detail a little later, but it's
11:23
going to have multiples of performance of V2 and it's going
11:26
to be great and it's going to be dispensed from Starship and
11:29
they're going to have their own silicon and you know, it's going
11:33
to be game over, right? And, and it's funny because like
11:36
if you kind of dig into the details, it's like Starship's
11:40
not viable right now. I mean, I, I don't know when
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maybe the next generation will be successful and, and God bless
11:46
like I hope it is for them, but to get to a commercial cadence,
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it's going to take some time. And, and V3 is dependent on
11:53
that. And, and in this report that
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Scotia talks about, they're like, oh, they're going to have
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this new ASIC and it's going to be gangbusters, right?
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Like, yeah, they, it, it, it could be gangbusters, but you're
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talking about something that's not going to happen till 27 or
12:09
28. Like the, the ASIC is still in
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development. Like even today, Star Starlink's
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satellites all use Fpgas. Like they don't have their own
12:18
ASIC. And, and we actually AST space
12:21
bumble took the last five years to, to spin up and tape out an
12:25
ASIC and now they're producing it.
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And so this stuff takes time. Like I think if you talk to
12:31
SpaceX bulls, like they'll tell you that the they'll tell you
12:36
that the, the ASIC that that SpaceX has been developing, they
12:40
probably have, you know, 12 months of development already
12:44
under the belt. And maybe it's going to take
12:45
another year and a half. But as we've seen just from our
12:49
own experience, like it takes a long time and, and you have to
12:52
iterate that. And you know, maybe you're lucky
12:54
in the first one that comes out is flawless, but it actually
12:59
takes iterations like you have to go back, fix some, you know,
13:02
correct some things. And you know, so A2 2 1/2 year
13:07
development timeline, which I think SpaceX bulls would say is,
13:11
is what they're targeting. Like that's a very short
13:14
timeline. If you talk to anybody who
13:16
designs semiconductors, like ASICS take, you know, 3-4, five
13:20
years of development. So anyway, I mean, maybe maybe
13:24
they've, you know, maybe they've, they're able to
13:28
accelerate that throw money at the problem, who knows, right.
13:30
But but anyway, I, I think, I think it's a bit rich to say
13:36
that V3 is going to do all these things, but yet it's not.
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I mean, it depends on Starship. And then a lot of these features
13:43
are going to yeah, we'll see. Like it's going to they actually
13:47
have to make the satellite and and, you know, go through the
13:49
same process that that we are. And, but yeah, so, so it, it's
13:55
interesting that this Scotia analyst and, and this is the
13:58
dynamic I want to talk about. Like if you work at a hedge fund
14:02
who's paying a shit load of Commission dollars to the
14:04
street. And in particular, like, let's
14:06
say if you're at .72 and you pay a lot of money to Scotia, which
14:09
by the way, like Scotia is 1/3 tier bank.
14:11
And they'll get money. They'll, they'll, you know,
14:15
their meat and their bread and bread and butter is probably
14:19
Canadian listed names. You know, they, they do some
14:21
stuff in the US, but you know, for them to get any Commission
14:26
dollars from trading is like a pretty big deal, right.
14:29
And so if you're one of these large hedge funds who's short
14:33
AST and you know, I was talking to one of the space mom members
14:37
who actually is still at a hedge fund and, and this guy was
14:40
talking about how a fund he knows is short AST in size.
14:46
You wouldn't say who it is and which is fine.
14:48
Like, I don't, you know, I can, I can imagine who that might be,
14:51
but, but they're short in size and, and it, it was a huge
14:55
negative impact for them in 2025.
14:57
And of course, over 2026, it's been, it's been a nightmare.
15:01
It's not good, right? And so I mean, imagine like
15:05
writing a letter to your LP's and you're short this company
15:09
that went from, you know, 20 bucks to 100.
15:15
And you know, how do you, your thesis is basically the
15:19
everyman's thesis, which is, you know, Starling's going to crush
15:22
these guys. They have all these satellites
15:24
already up and, and, and then you lose a ton of money on it.
15:26
And, and so how do you, how do you face LP's?
15:29
And you're like, oh, oh, you know, in 2025 it didn't work,
15:32
but I guarantee you like 2026, it's going to work, right.
15:35
Like, yeah, the forget about the fact that the company has 3
15:38
billion of capital raised and you know, they're about to
15:41
embark on this multi launch campaign and the Department of
15:45
Defense has like 9 contracts with these guys and they're
15:47
about to, you know, dole out a big Golden Dome award.
15:52
You know, Verizon and all the and AT&T and Vodafone and
15:56
Google, like they all have commercial agreements with these
15:58
guys. Yeah, forget about that stuff.
16:00
Like trust me, 2026, this trade's going to work.
16:03
And Oh yeah, yeah, forget about like the administration saying
16:06
that space dominance and, you know, having strategic
16:10
superiority is like a key focus and the FCC is like backing
16:14
these guys. And, you know, forget all that.
16:16
Like this trade, I guarantee you.
16:18
Like, it's going to work. Like I, I read the Scotia report
16:20
today and, and fair values like 55.
16:23
So I'm going to make, I'm we're going to make some of our money
16:26
back. Like forget that we were short
16:28
at 20. We got our faces ripped off.
16:30
You know, the, the short one against is up to 100, but we're
16:34
going to try to try to make some more money back.
16:36
Like that's that's awful. That's that's terrible.
16:39
Like if I was an LPI would pull my money out because clearly
16:43
like there's no risk management and or like research, but in
16:48
particular, like when it comes to Scotia, What's what's
16:52
interesting is as I was going back, sorry, went off on and
16:55
changed it. But in June, they changed their
16:58
tone and they went from being outright bulls, right, and and
17:03
bulls to the point where they were, you know, they actually,
17:06
and the reason why I was saying spoon fed today is like that is
17:09
totally possible with these guys, right, Because like they
17:11
were taking a lot of points from space mob and and incorporating
17:16
that into the research. And then you've got, you know, I
17:19
don't know what the exact process, you know, how it
17:21
unfolded, but you know, you had these hedge funds probably get
17:27
to Andres and his team, you know, whisper in their ear, like
17:30
what about SpaceX? There's all these things
17:32
happening and then, you know, in research there are there are
17:35
times when you have the director of research come to you and it's
17:38
like, you know, Are you sure about this company?
17:40
Because like they're getting heat from, you know, the prime
17:45
broker side, like, OK, this hedge fund is a really important
17:48
client of Scotia. They have a lot of assets here
17:50
in the trade. They trade quite a bit.
17:52
We're maybe we're doing stuff with them on the credit side.
17:54
And so they're giving us like, you know, they're putting
17:57
pressure on us to re evaluate like our view on this company.
18:02
And you know, it's like, it's kind of a dirty secret in Wall
18:05
Street. Like it, it totally happens.
18:08
Like if you disagree with with an analyst, you one of the
18:12
things you do is like as APM or an analyst, you call them up and
18:14
you, you argue with them, right? And you try to get them over to
18:17
your side. But then there's other like,
18:21
other ways to kind of bend people to your will.
18:24
And that's The thing is, is like corporate issuance for for
18:28
Scotia, like they're, they're going to make some decent amount
18:30
of money from commissions paid to them by the company.
18:34
But then what's you know, and that's for like, again, the
18:37
offerings, but what's going to be bigger for them is trading
18:40
commissions, right? And so if you have training
18:44
commissions and prime brokerage, right?
18:46
And so if you have a hedge fund client that that is really
18:50
important to you, you're going to listen to them, right?
18:52
And so this the timing of this report, I think, you know,
18:57
obviously, you know, stocks started ramping, you know, they,
19:01
they changed their rating to neutral.
19:03
I think when the stock was, you know, had this had a pull back
19:06
back in November. And then of course, the timing
19:09
now is like a right before all these positive things are going
19:12
to happen and the stock is like working.
19:14
They downgrade it because they from evaluation perspective to
19:17
sell, which is going to on the one hand, like people say, well,
19:20
these analysts don't matter, but it doesn't matter to algos and
19:24
trading and sentiment and momentum indicators and all
19:27
these things, right? Like these are all inputs that
19:32
that people use to trade. And So what what happened is,
19:38
you know, they downgrade the stock, whoever was short, they
19:41
they bailed them out. The stock, you know, came off
19:44
this morning. I actually took it, it took
19:46
advantage because I, I actually had a decent amount of call
19:49
options, which, you know, for luck or yeah, primarily luck,
19:54
but since they had, you know, I've done quite well on them.
19:56
I, I monetized more than half of them yesterday.
19:59
And so I had a bunch of cash and, and I had some additional
20:03
cash as well. And so today I I actually used.
20:06
The depth to to reload some of my risk.
20:09
And you know, who knows, like the stock will pull back more.
20:13
But but given what we have kind of in front of us and and you
20:18
know, I joked about this before about how people shorts are
20:22
going to be surprised as they enter the meat grinder.
20:25
I do think that we are about to enter meat grinder because based
20:29
off of our due diligence, there's like a number of things
20:32
that are kind of cooking in and the hopper that could come out
20:36
anytime now, right. And so and I think these are
20:39
like game changing type of things.
20:41
And so I think being short, yeah, you got a day of reprieve
20:45
from Scotia. You know, it took it took you
20:49
spoon feeding this analyst who initially like kind of thought
20:53
on their own, but clearly now they're getting spoon fed what
20:56
to write. But it took that for you to get
20:59
a day of reprieve, which, you know, God bless you.
21:02
Like that's the game, that's the investing game.
21:03
Like there's, there's an aspect of Wall Street where you, you
21:08
know, this is part of the dynamics, right?
21:10
Like you, people go to war, they try to influence analysts,
21:14
whether that's through words or monetarily.
21:17
And they tried to get things going their way, right.
21:20
And that's similar to what, you know, quite frankly, what Space
21:24
Mob does. Like we it's like the first time
21:28
where retail kind of works together and through due
21:31
diligence and, and, you know, work like, Oh yeah, you get
21:36
people to work together as a collective and, you know,
21:39
underwrite an investment and kind of spread awareness like
21:42
that's never been done before. Whereas like hedge funds and all
21:45
these other, you know, institutions like that's been
21:47
the game for a long time. And and retail has never had
21:50
access to that, whether it's like going to idea dinners or,
21:54
you know, people don't people it's a dirty word.
21:56
But but people do they do coordinate.
22:00
I mean, it happens all the time. Like activist investors
22:02
coordinate there. They form wolf facts.
22:04
They go after companies, they do all kinds of shit.
22:07
So yeah, it's it's you know, when I when I look at what
22:12
happened today, it's not I mean, it's not a surprise.
22:14
Like clearly Costello, when you Quello, when you read his stuff,
22:19
he's being food fed a lot of these points by, you know, short
22:24
sellers, which actually gives me quite a bit of comfort, right?
22:29
Kind of like when I read this stuff, it's just completely
22:33
harebrained. It doesn't make any sense.
22:35
Like, and maybe maybe that's a good segue to kind of start
22:38
going through this. I mean, so let's take a look at
22:41
his note here. So he starts off like, you know,
22:45
downgraded cell based off evaluation Starlink space
22:48
leadership means as TS faces an uphill battle.
22:52
What leadership are they talking about?
22:54
Like if you're talking about direct to Sell, yeah, Starlink
22:56
has 650 satellites orbiting the Earth.
23:00
They're in very low Earth orbit because they can't they they
23:05
can't actually make the link budget work and provide any
23:10
decent amount of data throughput.
23:12
So they actually had to lower those things originally, if you
23:14
remember those, those are supposed to fly at like, I think
23:16
550 kilometers, but now they're at 3:50.
23:19
So they had to bring them closer to Earth in order to communicate
23:23
with cell phones. And, you know, hopefully they by
23:26
doing that, they didn't have to increase the power.
23:28
And then, you know, we've I don't have to go into the whole
23:31
rigamarole of talking about interference.
23:33
But. But yeah, like Starlink had to
23:38
make a lot of adjustments in order to get their solution to
23:42
work and it doesn't work that great.
23:45
The other thing I would note is that by orbiting in very low
23:48
Earth orbit, their satellites don't have much time out in
23:51
space because when you do that, they, it requires a lot of
23:55
energy to keep them at that orbit and then eventually the
23:59
fall. And as, as we've read recently,
24:01
Starlink for the fixed wireless service, they're actually
24:04
lowering the orbits of all their satellites.
24:07
And you know, there's like various debates as to why
24:09
they're doing that. But but yeah, it's what that is
24:14
going to increase is, you know, more deorbits of these things
24:18
are going to burn up in the atmosphere from a from a an
24:20
environmentalist. Like that's that's pretty bad.
24:22
But I guess for SpaceX, that means that they get to launch
24:25
more rockets. And so you know that that keeps
24:30
the circular money machine going, I guess.
24:32
But anyway, but yeah, so this this initial, I guess this
24:37
headlined, it doesn't make sense because like, yeah, ASTS faces
24:40
an uphill battle. Like against who?
24:43
Like Starling direct to sell is not a competitor.
24:47
They're making inroads and I'll give them that.
24:49
And they have a service at MVP and minimally viable product,
24:53
but it's not broadband. And you know, I I can go more
24:57
into that as we read through this thing.
25:00
But but yeah, so this guy starts about without a single retail
25:05
customer and facing challenges of orbiting 50 satellites for
25:10
continuous service. The the, the stock price is
25:13
price basically for, for perfection, right?
25:15
Like it's overshot to irrational levels.
25:19
And so, you know, AST has a, a mark cap of 37 billion.
25:22
That's that's irrational, right? Because, you know, Starlink and
25:26
SpaceX going, you know, raising capital at at 800 billion and
25:34
then of course going public at 1.5 trillion next year or sorry,
25:37
this year. Sorry, in in six months, 1.5
25:40
trillion in six months, that's rational.
25:42
But for AST to have a market cap of 37 billion, that's
25:46
irrational. So let's get let's get that out
25:48
of the way. What's funny is like then this
25:50
guy says like evidence of slow user adoption in the US and
25:53
Japan, modest ARPU's and high cap Pecs, which I mean, and he
26:00
talks about like the fact that you need duplicate satellites
26:02
for new frequencies. Like where's this guy been?
26:05
Like, didn't you know that there are two shells of satellites
26:09
that will be up 1 is low band and the other one is big band?
26:12
Like did this guy think that you could do, you could serve low
26:16
band and big band frequencies all from the same satellite?
26:20
I hope he, I hope he didn't assume that, but you know,
26:23
whatever. I I guess maybe he just learned
26:24
that or, or maybe a short seller was like, hey, did you know that
26:28
the the satellites actually can't do low band and big band?
26:31
You actually need two different ones.
26:33
But yeah, that's it's kind of weird that that this guy didn't
26:37
know that. But but going back to evidence
26:40
of slow user adoption, like this guy's making a comparison to
26:45
Starlink's service that that's been, there's been slow adoption
26:48
there, which of course, like, yeah, of course there this,
26:51
there's been slow adoption because the service sucks.
26:54
Like it's, it's low band, it's not full broadband.
26:59
You've got to use dumbed down apps.
27:01
And so it's not it's not seamless.
27:03
And so the adoption, you know, he talks about like the US and
27:07
Japan, you know, in Japan, I the, the Japan has pretty good
27:13
cell coverage. And so I don't think that's
27:16
probably a good, you know, analog to what the adoption's
27:21
going to be in the US, which is a much bigger country.
27:24
You have, you know, 70% of of the country that's not covered
27:28
by Seoul cell coverage, right? In Japan, obviously there are,
27:31
there are, you know, in mountainous areas and, and, and,
27:35
and, you know, obviously there's also the other aspect of Japan,
27:39
which is not just 100% coverage, but it's also a disaster
27:43
recovery where ideally in Japan you'll have a first responder
27:47
type of network because unfortunately Japan has
27:50
earthquakes and, you know, typhoons and all these other
27:54
natural disasters. But, but anyway, I think, I
27:56
think trying to use Japan as a comparison doesn't make sense.
27:59
And then of course for T-Mobile in the US, like you're offering
28:04
basically the same service as Apple's, you know, global star.
28:08
And so I don't really think that's a good comparison,
28:11
although, you know, based off, but then this guy like also
28:15
admits like, you know, T-Mobile hasn't disclosed the numbers.
28:18
So I, I have no idea like where he's getting assumptions.
28:20
But anyway, but it's funny because like then he talks about
28:24
how Starlink's accelerated fixed wireless growth in global band
28:29
recognition, global brand recognition means that AST
28:34
competes with a, a leader that already has in terms of revenue,
28:37
the equivalent of 340 million direct to sell users.
28:41
So like, so this is like some real like mental contortion.
28:46
It's like, what are you talking about?
28:47
Like you're comparing, you're saying the revenue that they
28:50
generate from fixed wireless is the equivalent of this many on
28:53
direct to sell. And so they're going to be a
28:55
dominant leader, which it doesn't make any sense.
28:57
Like you're comparing 2 separately separate different
29:00
markets that are not comparable. 1 is, you know, basically like
29:04
high speed broadband Internet to your home.
29:07
And then the other one is direct to sell like broadband to your
29:09
cell phone. Like it's, it's apples and
29:11
oranges, right? And So what, what's funny is
29:13
like this guy says, because they, they have accelerated
29:19
growth on the fixed wireless side.
29:20
Like it's game over AST, which it's like, yeah, I, I, I really
29:25
don't know what to do with that, right.
29:27
And he also talked about like global brand recognition.
29:29
And, and so, yeah, Starlink has global brand recognition and
29:33
that's their game. They spend a lot of money on
29:35
that because what are they doing?
29:37
They're selling dish terminals directly to consumers.
29:40
And so people need to know that, oh, this is a Starlink service
29:44
site and I'm going to get this instead of a Spectrum or a
29:47
Verizon FiOS or, you know, some, you know, charter, Charter
29:53
Communications, like I'm not going to get wire broadband
29:56
Internet from them. I need to go call Starlink and
30:00
order a dish terminal that they send to my house and then sign
30:02
up for the service. So of course they're going to
30:04
have more brand recognition. Like that's how they sell their
30:06
service. And AST is not in that business.
30:09
They're in a perfect world, AST space, mobile people who use the
30:14
service, they're not going to know about AST.
30:16
Like we are a wholesaler. We we provide a white label
30:19
service that AT&T is going to use and God bless like AT&T that
30:23
they've continued to say her name and, and you know, social
30:26
media accounts, whoever runs that, you know, hypes up AST
30:31
space mobile, but for intended purposes, like we're, we're the
30:35
infrastructure layer. We're the provider of the
30:38
consolation reusing, you know, reusing their their spectrum for
30:42
the low band stuff. And so AT&T and Verizon at the
30:46
end of the day, like when they go to their customers, it's
30:48
going to be Verizon satellite service or it's going to be AT&T
30:52
satellite service. It's not going to be T-Mobile T
30:56
set powered by Starlink, right, like AST space mobile.
31:00
It's not going to be that. That's not our aim like, but
31:03
that's why the business model works as well as it does because
31:06
we don't have to spend any marketing.
31:08
Starlink has been marketing because they have to go get
31:10
fixed wireless customers. And, and ultimately, you know,
31:15
we, we joke about this Trojan Mars, but it's true like
31:17
Starlink, eventually we'll get into the wireless business.
31:20
Like I think whether they do that through an MVNO
31:25
partnership, you know, maybe they'll, they'll start Starlink
31:27
mobile and they'll, they'll, you know, they'll, they'll resell
31:31
service from T-Mobile and then and then of course leverage
31:36
their satellites too. Maybe they'll do that some point
31:38
in the future, but that's not in a space mobile's cards like the
31:41
company is, is a wholesaler and works in partnership with the M
31:46
and OS. And so branding is not something
31:49
that matters to the company. The only people who cares about
31:51
branding are quite frankly, us, you know, because we're we're
31:54
out there kind of vandalizing like the what the company's
31:59
doing and and the investment. But for intensive purposes, like
32:03
the company does not want to spend any money on branding.
32:06
That's up to AT&T, Verizon, Vodafone, Rakerton, you know,
32:12
Orange, you know, Satco, JV, Google, you name it.
32:16
Like all those other guys, they're spending the money.
32:18
And that's why the business model, that's why you're able to
32:21
get eventually like EBITDA margins that are going to be 90%
32:26
because you're not spending like Kook would say you're not
32:29
spending money on customer acquisition cost, right.
32:32
And and you know, I'd, I'd be really interested to see how
32:36
much Starling spends on customer acquisition cost.
32:38
In the end, this is just for the fixed wireless business.
32:41
But but yeah, this guy is like he's comparing 2 two different
32:45
things. Like he's saying because
32:46
Starlink is dominant in fixed wireless and they have brand
32:49
recognition, it's going to be hard for AST Space Mobile to
32:52
catch up. And it's like AST Space Mobile
32:54
is not in that business. They it's direct to sell.
32:57
It's broadband and they're selling through M and OS.
32:59
Like they don't want brand awareness, M and OS.
33:02
They want the M and OS to go in their selling motion to
33:04
customers and say, hey, here's broadband.
33:08
Maybe they'll say it's powered by AST, maybe not, but they'll
33:10
say here's broadband, it works. And do you want to pay $15.00 a
33:14
month more or $20.00 a month more or a day pass for $10 or
33:18
whatever it is, right? Or if you're on your, if you're
33:20
flying on your airplane, you're just going to use it like you're
33:23
going to bypass this Starlink, you know, service that that's on
33:26
United, you'll just connect your phone directly to satellite.
33:31
But anyway, but yeah, so, so this guy saying that and this is
33:35
the type of shit that like if you go to hedge fund idea dinner
33:40
and you and you have like some guy who's short your name, this
33:43
is the type of shit that they would say they would be like,
33:45
well, you know, Starlink has the equivalent of 340 million direct
33:51
to direct global direct to sell customers, which is 680 million
33:56
equivalent of that. By the time ace team watches in
33:58
select markets, it's like, what do you, you're, you're, you're,
34:03
you're making shit up. Like it's, it, it doesn't make
34:05
any sense. Like you're, you're, you're,
34:07
you're basically like trying to throw scary numbers out there.
34:09
And this is what, by the way, like activist short sellers do
34:12
too. They, they, they create these
34:13
big numbers that are scary. But then you look and it's like
34:16
this makes this analysis makes no sense.
34:18
Like you're telling me that fixed wireless revenues, which
34:21
are clearly like the RPS are higher, right?
34:24
Like someone's paying 80 a hundred, $150.00 a month for all
34:29
you can eat Internet at your home.
34:31
That's a very different proposition than, you know,
34:33
sporadic use on your mobile phone when you're out.
34:36
Like you're going to pay $1520.00 for a Peace of Mind.
34:39
Right. And I think this is another
34:41
point that people forget, which is like, you know, they're you
34:47
have these bears that say, well, you know, it's, it's it's a
34:49
luxury. No one's going to pay for it.
34:51
And, and it's not going to get used that much.
34:53
Yeah, that's true. That's 100% true.
34:55
It is a luxury, number one, and #2 it is a service that's not
34:59
going to get paid. You know, that's not going to be
35:00
used that much. It's going to be used
35:02
sporadically, right? Like those times that you don't
35:04
have coverage, you're going to. But but those are the times
35:07
often when you need coverage, that's when you're going to use
35:11
it. And that's why that's the beauty
35:12
of the model, which is like the, the amount of subscribers that
35:15
you can actually serve on the consolation is massive because
35:18
not everybody's using it at the same time.
35:21
And and then, but then people will push back and say, why
35:23
would I need that? And it's like, well, you do
35:25
know, like when you use your cell phone, you pay what
35:29
whatever it is, like $100.60 to $100, a $120.00 for the
35:34
privilege of using that cell phone for about maybe 5% of the
35:36
day. Like you're the 5% where you're
35:39
out and about and you use it like you pay that huge premium
35:45
to use that phone. But most of the time, like that
35:47
phone, you're looking at it and it's connected to Wi-Fi.
35:50
It's, it's either in the office or it's in the home, right?
35:53
Or it's indoor somewhere where you've, you're connected to
35:55
some, you know, some Wi-Fi or hotspot, right?
35:57
And so like, think about that. People pay this massive premium
36:03
to use your cell phone for about 1010% of the day, 5% of the day
36:06
you pay for Verizon pay to you for that.
36:09
And so for satellite services like your, you know, I, I went
36:13
skiing this past weekend and the entire mountain, the only, only
36:18
in the lodges could you get service.
36:20
And then outside of that, like there was no service whatsoever.
36:23
And so my, my wife is like on Amazon looking at all these
36:26
walkie-talkie solutions. And yes, we're going back to
36:29
that ship like, because the kids are older now and they, they
36:32
want to go ski on their own. And it's like, my God, like
36:34
when, when we do have, if these face mobile service, like we
36:39
won't have to buy these damn walkie talkies to stay in touch
36:41
with the kids. Like they can just use their,
36:43
their Apple Watches, which, you know, on the mountain, they
36:45
don't work because there's no wireless service.
36:49
And so, you know, am I going to pay?
36:52
Maybe I'm not, you know, maybe I'm not your like model
36:56
customer. Maybe I'm at the higher end, I
36:58
guess, but I would pay $15.00 a month more for that so that I
37:02
can communicate with my kids during ski season.
37:05
And then on top of that, you know, we've talked about this
37:07
before, but like if your kids get lost, you know, if for
37:11
example, in New York, like if they're on the subway and they
37:13
get lost and they're in this area where there's no cell
37:16
reception, like that's unacceptable.
37:17
Like I'm paying the premium for that, right?
37:20
Or if your kids, I don't know if you're, if you live in Boulder,
37:23
Co and you have teenagers and I don't know, they go out drinking
37:26
on the mountain somewhere and there's no cell reception and
37:28
something bad happens. Like you want connectivity all
37:33
the time. You want to be able to keep tabs
37:34
on them. You want them to be able to call
37:35
you. Like for the price of two cups
37:39
of coffee a month or three cups of coffee.
37:41
I mean, coffee is pretty expensive.
37:42
Now you're, you're going to tell your wife like, you're not going
37:45
to subscribe to that. Like you're you'd be nuts.
37:46
You'd be insane, right? And so, yeah, I mean, this past
37:50
weekend was a, a great reminder of the fact that there is no
37:53
coverage even in this developed, you know, in New York State, you
38:00
know, in, in an area where there's a ton of people doing
38:02
this, you know, doing activities and they've got disposable
38:04
income, there's no cell coverage.
38:06
And so there's, there is a huge market for this.
38:10
But anyway, I guess I'm going really slow because I'm not even
38:13
through the 1st paragraph, but but yeah, it's, I guess like
38:18
this guy is a refrain. Let me see here.
38:20
You know, it's been an ordeal that the company has launched 7
38:23
satellites since 2017. Again, this is the type of shit
38:27
like short sellers, right? Yeah, since 2017.
38:29
The company just started in 2017.
38:31
Like they didn't get their first satellite up, Blue Walker, Blue
38:35
Walker one until I guess it was like 2019 to prove it to do
38:40
testing and prove concept. But like if you want to play
38:43
that game, let's go back to when Starlink started and and how
38:47
long it took or SpaceX started. I mean, you know, I use this as
38:50
an example. Like if you want to play that
38:53
game like SpaceX, Starship was supposed to be landing on the
38:56
moon three years ago, like 2022. Like guide, this stuff is hard.
39:02
It it takes time, it takes longer than you think.
39:04
And the way that the mentality works in space, space industry
39:08
is like you set aggressive time timelines because you need
39:11
suppliers, you know your employees, you need everybody to
39:14
work towards a specific goal. And if you set something that is
39:17
more realistic, and I put that in quotes, like you're going to
39:21
slip beyond that, right? And so you, you do set
39:24
aggressive timelines. And, and so I think like the
39:28
fact, you know, this guy saying that somebody's only put up 7
39:31
satellites, but then Starlink in 2025 alone orbited 3169 units.
39:38
Yeah. But what we're, again, we're
39:40
talking about like apples and oranges, right?
39:41
Like those, those Starlink satellites that were sent up to
39:44
space are what is it V twos and V2 dot fives?
39:48
They're much smaller, right? And that's for fixed wireless.
39:51
And, and in order to scale the fixed wireless network, they
39:57
need to keep setting those things up, right?
39:58
It's interesting to see like, you know, Starlink actually
40:01
hasn't expanded the 650 direct to sell satellites.
40:04
I wonder why? You know, I, I can speculate as
40:07
to, you know, they're obviously are trying to improve the
40:10
service and and they're going to try to do that with V3, but why
40:15
aren't they sending more direct to sell satellites up in space?
40:17
Why are they stuck in the 6:50? So anyway, but yeah, it's this
40:22
guy, I guess to earn some credibility back.
40:25
Credibility back. He says we disagree with those
40:27
seeing ACS is a meme stock. And so clearly like there he's
40:31
telling you like, yeah, we talked to a lot of short sellers
40:34
and, and in order to kind of cloak this as somewhat of a
40:38
balanced report, we disagree with those shorts that as you
40:41
say, this is a meme stock. And you know, they say the
40:45
technology remains highly disruptive, has potential dual
40:47
use. But we also disagree with those
40:49
dismissing AST's multi year delays and Starlink's
40:53
unstoppable growth. OK.
40:56
And so they, they, they use that as justification that that
40:59
company should be valued more at $45.00 a share.
41:02
So going back to the valuation, like, you know, you've heard
41:06
people whether that's Kook or, you know, I see like endless out
41:11
there. Orion yeah, there's let's talk
41:15
about valuation Like the company is if it, if it was worth $37
41:18
billion, you know, we can do some of the parts like Legato is
41:23
probably worth $15 billion. And so you're getting commercial
41:25
business for, I don't know, 20 billion as of yesterday's
41:29
valuation, that is, but you're getting it for 20 billion.
41:32
And that doesn't even count like the military side, right?
41:34
And so, you know, any which way you cut it, like I think the
41:39
valuation is justified based off of the potential for the
41:43
business. And, and we're at this point
41:45
now. You know, what's funny about
41:47
this research report is like they don't talk about the coming
41:49
they they focus on the fact that it's taken longer than than
41:51
people expected. And I give them that, you know,
41:54
for example, they they talk about like how the company in me
41:59
see, I think in 20 late 2020, the company was guiding to
42:04
having 110 satellites in orbit by 2023.
42:08
And so, yeah, clearly things slip like it took longer to
42:12
develop. The capital markets also shut
42:14
down. You know, the company went
42:16
public, right, as, you know, the same year as, you know, SPAC
42:20
bubble kind of blew up and then rates went through the roof in
42:23
2022. And so the, for all intent
42:26
purposes, like all the growth companies got completely
42:29
hammered. And then, you know, capital
42:30
markets were pretty much closed and so the company had to slow
42:33
down. But yeah, it's so yeah, we're
42:37
you can look back and say that it took longer, just like it
42:40
took SpaceX longer to get Falcon 9 going, it's taking them longer
42:45
to get Starship going for for Starlink direct to sell.
42:49
I think based off of their original projections, they were
42:52
off by two years because they said they were going to get beta
42:54
service going in 2022 and then it took them till 2024,
43:00
second-half of 2024. So yeah, this stuff takes it
43:04
takes longer, right? And, but, but in this report,
43:09
you know, he talks about how the fact that it's taking so long
43:12
that you know, that that should dock the company, which, you
43:16
know, fair enough, like, but they're getting up to their
43:18
production cadence. And I do expect like we're going
43:20
to hear relatively soon an update on that.
43:23
And, and also, you know, we, I guess we, we have talked about
43:28
to a degree, but I think FM 2, which is BB7, like that's,
43:33
that's an SDA Halo satellite or that, you know, they're going to
43:36
be doing SDA stuff on that satellite.
43:38
And I think that one is going to go up on Blue Origin, New Glen.
43:43
And so, you know, probably just based off of timing, you know,
43:47
that that probably is going to happen sometime in early
43:50
February. And then you've got 2 batches of
43:54
Lock 2 Bluebirds that will go up on Falcon Nine.
43:56
That will probably happen I think early February and late
44:00
February. So, so yeah, we're, we're at
44:03
this point where we went through production hell and we're
44:07
ramping up cadence for production and we're, we're
44:09
launching satellites, right. And so, so yeah, it's kind of
44:14
funny because like this guy valuation has stayed static.
44:19
Like it's been $45.42 to $45.00. Like whenever the company does
44:24
the financing, it's kind of funny.
44:24
Like this guy includes the incremental dilution and then
44:28
adjust this stock price target like so like $1.50 or $2.00,
44:33
which is kind of funny. But, and we'll talk about his
44:35
modeling in a little bit. But but yeah, so it, it's, it's
44:40
taking longer. But we're now what's funny is
44:42
like we're at the cusp of launch and this guy is downgrading
44:45
stock, which, you know, more power to him.
44:47
Like he maybe he's looking to make a name for himself and
44:52
clearly as amongst amongst space mob.
44:54
But as I said before, I think he's doing, you know, some of
44:58
his his short seller hedge fund clients as a service.
45:03
But here, let me just take a look here.
45:10
So again, he reiterates like Starlink is the absolute leader
45:14
on satellite fixed broadband with over 150 countries.
45:18
So what? OK, I get it.
45:20
Like who cares? Like, yeah, there there are
45:22
economies of scale obviously that you know, for in on the
45:26
production side things that you learn about building satellites.
45:28
There, there are some there obviously, you know, production
45:33
economies of scale and inefficiencies that you can
45:36
leverage. And you know, the the the
45:38
platform is, is similar for the fixed wireless satellite and the
45:43
direct to sell satellite. And, you know, it's unclear at
45:45
this point, like if they will have separate satellites or
45:49
they'll just be hosted all in one satellite, which if they do,
45:51
that's a lot of stuff going on. And then of course, you know,
45:54
Alan's talking about putting data center applications on that
45:57
satellite too. So I don't, I don't ultimately
46:00
know like what that sound like it's going to look like.
46:01
But but again, this guy, this guy confuses like fixed wireless
46:07
leadership with direct to sell. Like immediately that means that
46:10
they're going to be an absolute leader of direct to sell, which
46:13
again, like there's room for two players.
46:16
AST has the most M and OS and the most at least today in terms
46:21
of addressable. You know, Tam, they've got 3
46:23
billion subscribers and and you know Starlink as I think they've
46:28
ramped up to like 20s now in terms of MN OS.
46:31
But again, a lot of these companies are small, they're not
46:34
really big players. And so we'll see.
46:37
But what's funny is like as you move on again, he talks about
46:43
like how Starlink's global ARPU is, you know, average revenue
46:46
per user is $85 a month versus what AST is going to have, which
46:50
is going to be lower because obviously it's direct to sell.
46:53
Again, this is the type of stuff that a a short seller would say
46:57
to you like, oh, these guys have much higher average revenue per
47:01
user versus what AST is doing. It's like, yeah, Sherlock, like
47:04
no shit there. It's a completely different
47:06
service. But then it's kind of funny
47:09
because like this guy talks about how the, you know,
47:13
Starlink is going to, you know, the rumors that they're going to
47:17
launch service with a Mexican MNO, which I think is Telcel,
47:23
which quite frankly, like, I'll be honest, I don't really know
47:25
the Mexican market that well. But I guess what's funny is like
47:29
the guy doesn't write about the fact that the company is working
47:32
with Alton and Alton. Is it Alton or Atlan?
47:37
Atlan in, in Mexico, which is government owned.
47:40
And so for those that don't know Atlan is they own 70% or sorry
47:45
they they own 700 megahertz spectrum in Mexico that covers
47:50
the entire country. It's basically like a government
47:53
concession where the government tasked them to blanket the
47:58
entire country with wireless coverage.
48:00
The the previous entity before went bankrupt before
48:03
accomplishing that and then the government took it over.
48:06
But now ASD Space Mobile's testing service with them
48:09
because that company is a wholesaler is the whole goal of
48:15
that company is to enable additional competition in
48:18
Mexico. So provide basically like
48:21
wholesale services to any MVNO or MNO.
48:24
And so community, this guy doesn't talk about the fact that
48:27
AST is working with the Mexican government to provide broadband
48:31
connectivity to Mexico. He just, he's focused on the
48:35
potential that maybe Carlos Slim or somebody else is might work
48:40
with Starlink to do direct sell, which by the way, like I doubt
48:42
it's Carlos Slim because if you guys will remember, Elon Musk
48:46
called Color Slim like a drug dealer.
48:48
So and then Color Slim said he's never working with Starlink.
48:52
So I don't think it's that. But anyway, yeah, so but it's
48:58
funny because like this guy talks about how losing Mexico is
49:01
somehow going to mean like it's game over for the rest of the
49:04
globe. Like, you know, is he's already
49:07
working with the Mexican government.
49:08
They're going to provide 100% coverage to the country.
49:12
And so you're not even talking about that.
49:13
But then let's say even if they do lose Mexico lose meaning a,
49:17
a, one of the players there decides to work with Starlink,
49:20
which means like the other players probably will work at
49:21
AST. But that doesn't mean you can't
49:25
project that forward to mean like AST is going to lose global
49:28
leadership. It doesn't make any sense.
49:29
Like if you want to play that game, let's talk about Europe.
49:32
Like Starlink is pretty much locked out of Europe except for
49:35
Ukraine. But in terms of Europe's
49:38
European focus on sovereignty, like Vodafone, the Sacco JVI
49:43
think Europe is going to be locked up and an AST is going to
49:47
get the two gigahertz of MSS spectrum that's going to be
49:51
allocated in, in May of 2027, which I don't think Echostar is
49:56
going to get that because I think the EU will totally look
49:59
through Echostar. You know, they'll, they'll look
50:01
through that veil and know that ultimately it's going to be
50:03
Starlink. That's that's asking for that
50:06
spectrum. And they're not going to get it.
50:08
Or if they do, they're going to get an allocation of 5 by 5 or
50:11
maybe 10 by 10. But but AST will get a 10 by 10
50:15
allocation as well. So anyway, but yeah, it's yeah.
50:20
And when you read this stuff, it's it's it's again, it's like
50:23
something that you would expect from a short seller if you're at
50:26
this idea dinner where they're just trying to like, you know,
50:28
hem and Haw and and look, make something sound really, you
50:33
know, fantastic that oh, this these guys have the equivalent
50:37
of 340 million direct to sell customers based off of their
50:40
Starlink fixed fixed wireless numbers, which you know, that's
50:44
by revenue. It's like, it doesn't make
50:46
sense. Like you're not you're not
50:47
comparing apples to apples here. Anyway, let me let me go through
50:52
this. Well, I'm already at like 50
50:54
minutes. But yeah, this guy talks about
50:57
like how ASTS like losing time and advantage, whether it's 48
51:01
hours. I don't know where where the 48
51:02
hours come from, but but yeah, if you talk to Scott and he said
51:06
this publicly, like they think they're a good five years ahead
51:09
of everyone else. And that's that means like
51:11
Starlink and everyone else because they're doing actual
51:14
broadband, unlike what Starlink is doing.
51:17
And, and yeah, it's a race. It's not really race against
51:20
Starlink because again, the market structure is probably
51:24
going to be a duopoly. It's really a race against time,
51:27
you know themselves because obviously you know, they've
51:30
raised $3 billion, but every quarter that goes by, they still
51:35
have fixed operating costs they've got to cover.
51:37
And, and there is there is some risk, right?
51:40
Like if you don't deliver service on time to customers,
51:43
then they'll be unhappy, right? Like M and OS will be unhappy.
51:46
However, the one of the luxuries of this is that the alternative
51:51
is, is Elon Musk right? And so for, for an M&O facing
51:58
that prospect where, you know, Starlink's fixed wireless
52:01
business or he competes with what you're doing for 5G home
52:05
and, and you know, fiber to home, that's not something you
52:09
want to do because it's, you know, Starlink, they're selling
52:12
directly to customers. They want to own the customer.
52:16
And so do you want to invite that Trojan horse where, you
52:19
know, the way that the Starlink direct to sell network works is
52:22
that they actually take the customer in it and it's off on a
52:25
separate roaming network. It's not actually integrated
52:28
into the MNO core. And so so that's not good,
52:31
right. But anyway, But yeah, it's I
52:36
think when it comes to timing, clearly like the companies had
52:41
production hell and you know, customer requirements have
52:43
changed on the military side. But you know, we're at the other
52:47
end of that or almost and any day now there's going to be
52:50
quite a bit of news that's going to be positive.
52:52
And I get, like I said before, I think this Scotia report is
52:55
given the short seller some level reprieve, maybe a day or
52:58
two, But you know, hopefully they, they, they took time, they
53:03
took the advantage of covering some of their positions today
53:06
because you don't get these often.
53:09
But let's see. I, I won't even go into this,
53:12
this Netflix analogy, which doesn't make any sense.
53:16
And for those who don't, who haven't seen the report, are,
53:18
are are short seller buddy, the real capital, the ultimate
53:22
inverse. He actually posted it and then
53:24
he basically like highlighted everything in the report, which
53:27
is kind of funny because like literally he can't articulate
53:31
the short thesis, but you know, Scotia can because everybody,
53:34
the short sellers have told him that and so he just posts it
53:37
without comment. But anyway, but yeah, this this
53:42
whole like Netflix analogy. I I really don't get it.
53:47
You know, again, this guy talks about like how Starling the I
53:51
guess he got like wowed by the annual report they, they put out
53:54
a few days ago. But you know, he talks about
53:56
like how fixed wireless is that it only took, it took them a
54:00
year to add 1,000,000 Subs and then 47 days to hit 9 million
54:04
Subs. Again, like this is comparing
54:08
apples to oranges, right? Like I don't understand what
54:11
this guy's trying to do. So this is a fun one.
54:15
He this was, this is a point he made, I think it was back in
54:18
June where he was like, Starlink has such an advantage that AST's
54:23
customers may lose interest and grow a patient and then switch
54:26
to Starlink. And so his claim to fame, of
54:29
course, was back in June. He wrote that.
54:31
And, and this is like a point that was being echoed by our,
54:36
our, our friend dim spacebar, Tim Farrar, who's like, oh, I
54:40
think Verizon is going to switch to Starlink.
54:43
And then like it was 24 hours later when he published that
54:47
report that Verizon signed their definitive agreement with, with
54:50
AST, which is hilarious. What was that?
54:52
Was that September or what? I'm sorry, was that June or was
54:55
it October? I forget.
54:56
But anyway. But yeah, so it's funny because
54:59
like this guy, he, he's, he's not written about this, I think
55:03
3 times about how customers may move.
55:05
But then he in no report has he actually acknowledged that
55:08
Verizon signed a defender agreement with AST.
55:11
And he also does not talk about Saudi Telecom, which is probably
55:15
like the biggest outside of 18 team Verizon.
55:19
Saudi Telecom is probably the biggest win for the entire
55:22
industry, right? Like you've got this company
55:24
that has committed to $1.8 billion / 10 years, $175,000,000
55:30
prepayment. That's about as good as it gets.
55:32
And like if this guy wants to peel back layers of the onion.
55:35
Like Saudi Telecom is owned by PIF, which is the the sovereign
55:39
wealth fund of Saudi Arabia. PIF also owns a shit load of
55:43
SpaceX and they know along Musk very well.
55:47
And so yeah, like that's a pretty important point of
55:49
validation. Like Saudi Telecom evaluated
55:53
Starlink for how many ever years and at in October they signed a
55:59
deal with AST space mobile. This this little start up out of
56:02
Midland, TX over the giant behemoth that you know, Scotia
56:06
is glazing over. They they didn't pick them, they
56:11
picked AST. But funny enough, like this guy
56:14
hasn't written about it nor will he write about it because he's
56:17
again, he's just kind of reiterating the short sellers
56:22
selling points, right? And so this guy also talks about
56:26
like, how, let's see here, I mean, this is a bit of mental
56:29
gymnastics, but like, you know, Starlink has signed Virgin O2
56:34
and UK. That's really scary.
56:37
Yeah, Starling signed them because that company, Virgin O2
56:43
couldn't sign with anyone else because AST, Space Mobile and
56:46
Vodafone have exclusivity in UK. And so even if AST wanted to
56:51
sell their service to Virgin, they couldn't.
56:53
And you know, the other thing that people, you know, KDDI and
56:57
Tito, Cobo and SoftBank have signed with Starlink in Japan.
57:00
The only reason why that is, is that the AST space mobile can't
57:05
sign with those guys because Rakuten has exclusivity.
57:07
And Rakuten truly believes like AST is, it is going to allow
57:12
them to differentiate their service and deploy the spectrum
57:15
more efficiently. And so they, you know, they're
57:17
the small, the small fourth player in that market.
57:20
And so they see a tremendous amount of market share grab that
57:25
they that they could go after. So why would they give up
57:28
exclusivity? And so similar to Japan and the
57:32
UK, yeah, Virgin had only one party to sign with and that was
57:38
stalling. So I don't know what the big
57:39
deal is. Excuse me and then let me see
57:47
your, you know, this guy talks about like Echostar acquiring
57:52
the 10 megahertz of a WSH block and 40 megahertz of a WS4.
57:58
That spectrum they acquired by the way is for the US only.
58:02
And so they still have to work out with Echostar global rights
58:06
whether they get those rights, you know, we'll see.
58:09
But it was only for US. And so I think that is important
58:11
that that $23 billion, yeah, sorry, $19 billion for the first
58:17
transaction that was only for US Spectrum.
58:20
And so again, that gives you kind of a data point as to, you
58:24
know, the value for Legato. But let me look here.
58:29
So then this guy goes into this like tirade about how the next
58:34
generation of Starling direct to cell satellites will feature
58:37
custom SpaceX silicon. Yes, it will, but that silicon
58:40
won't be available until 20282027 probably advanced phase
58:46
array antennas. OK, sure. 5 by 5 it is.
58:49
It is. It's advanced and it's it's
58:51
going to be bigger than 2 1/2 by 2 1/2 meters, which is what they
58:54
have now. It'll be 5 by 5, which is
58:56
better, but it's not great and it will be solely mid band,
58:59
right, Because they don't In order to serve low band cellular
59:04
spectrum, you have to build the much bigger phase arrays.
59:08
Let's see here thousands of spatial beams.
59:10
OK, ASD has that too. ASD in particular for a low band
59:16
has what is it? I think like 3000 cell cell
59:21
beams. And then for mid band blue
59:22
burns, it'll be about 10,000 cell beams.
59:24
But OK, yeah, deliver 20%. Sorry, 20 times higher
59:28
throughput per satellite hundred 100 times overall more system
59:32
capacity in the only 5G experience.
59:34
So like this guy is, or his analyst, his junior guys or
59:40
whatever, they, they basically just like copied and paste this
59:43
from Sterling presentation. So OK, that's fine.
59:47
Satellites will operate at 360 kilometers in altitude and
59:50
they're, they'll have a laser mesh network of 9000 satellites
59:54
that will function as cell towers in space.
59:55
And then, oh, and, and they also talk about how the net this it
1:00:01
has a regenerative architecture. And so, yeah, we we've gone.
1:00:07
This is funny. Like we've gone really far and
1:00:11
deep on why 2 networks, you know, how they, how they're
1:00:13
different and the advantages and disadvantages of both.
1:00:17
But the network that Starlink is putting up is going to require
1:00:21
that your cell phone basically reconnect to a satellite every
1:00:24
one to two minutes. And so that means like your
1:00:28
phone, the battery is going to drain, it's going to be
1:00:30
searching for satellite constantly.
1:00:32
And that's going to also impact their ability to allow you to do
1:00:36
voice over LTE, which they can't do today.
1:00:38
They probably can't do it for the foreseeable future.
1:00:42
And So what, you know, the disadvantages of somehow this
1:00:48
guy like contorts, he uses like all these data points and says
1:00:52
that it's going to be a differentiating advantage over
1:00:56
AST, which lacks a fixed consolation for wireless
1:00:59
meshing. I so I'm, I'm a bit stumped
1:01:02
here. I don't, I don't understand what
1:01:03
fixed consolation for wireless meshing is.
1:01:08
Maybe Catsy can help and maybe I'll ask him, but I have no idea
1:01:13
what that point means. But anyway, I'm sure it was fed
1:01:17
to him by some short seller and then he just, you know, ran with
1:01:20
it. So anyway, I guess we're getting
1:01:24
closer to the end here, which is good because I didn't think I
1:01:27
was going to spend this much time going through this piece of
1:01:29
shit. But I guess I have in the in the
1:01:33
final conclusion about, you know, the fact that the
1:01:35
company's fairly valued at 45 to $55 a share, you know, at $20 a
1:01:41
share, 2025 dollars a share, that's basically the value of
1:01:44
Locato. And so, you know, then the $20,
1:01:49
what they're ascribing to is basically the commercial and
1:01:51
military business, which doesn't make any sense to me.
1:01:54
But what's funny about this guy is that in order to get to a
1:01:58
lower valuation, let's see here he uses in his model, you know,
1:02:06
he says we're not being conserved in a model, but we
1:02:08
will base our target valuation on the first year of, let's see,
1:02:14
reasonable free cash flow, right?
1:02:18
And so that is 2028. And so we look at 2028, he's
1:02:22
modeling $3.5 billion in free cash flow, which is, which is
1:02:26
massive, right? Like if you, if you put a, a 10%
1:02:29
like free cash flow yield on that, that's you're looking at
1:02:32
$35 billion for evaluation equity value, right?
1:02:35
And so, but you know, he's, he's using that number in order to,
1:02:40
and you know, I'm not sure when they use their DCF.
1:02:48
I'm not sure like how they're getting to I, I actually have
1:02:50
to, I need to throw these numbers in Excel file and see
1:02:53
how they're getting to it. But you know, they, they come to
1:02:55
a 4045 to $55, you know, per share evaluation, which I guess
1:03:02
assumes like 225 million paid subscribers with a global ARPU
1:03:06
average of $2.92, which I think is really low by the way.
1:03:10
But what's funny is like if you look at his outer years, like if
1:03:13
you look at 2028, he's going to focus on that number, 2027, it's
1:03:18
like 1.5 billion of free cash flow, 2028 is 3.5.
1:03:21
But he's using that number because that's what fits the
1:03:24
output, right? But then if you look at 2029, it
1:03:28
basically double s to like $6.1 billion and then 2030 it's 11.6
1:03:34
billion. And then by the time you get to
1:03:36
like 2032, you're looking at like $18 billion of free cash
1:03:40
flow, which is insane, right? Like he's, you know, he's
1:03:47
arguing that the company is falling behind and shouldn't you
1:03:51
know, and for a whole host of reasons like evaluation is ahead
1:03:55
of itself. But then he's modeling like
1:03:57
$17.8 billion of free cash flow by 2032, which is insane.
1:04:03
And so I guess he cherry picked like if you really wanted to,
1:04:07
you know, Ding the, the valuation, maybe you would use
1:04:10
2027, which is like 1.5 billion of free cash flow.
1:04:13
But I don't know, like if I sold, if I look at these
1:04:18
numbers, like, I think I think $100 is like undervalued in the
1:04:22
company. Now, obviously there's going to
1:04:23
be execution risks and and it depends on how quick, how
1:04:27
quickly or you know, how much people discount Ford future cash
1:04:33
flows. But The thing is that you know,
1:04:36
when the when the company gets some of these military contracts
1:04:39
and they start growing in size and people start actually
1:04:41
layering in like, for example, this guy talks about dual use
1:04:45
case, but then in his numbers, like the only guy I see is
1:04:48
commercial business. He's not even taking it.
1:04:50
He's just like taking commercial sub subscribers and an ARPU to
1:04:56
get to a number, but he's not taking account like first step
1:05:00
or he's not taking into account any of the defense use cases,
1:05:02
which could be several billion dollars of free cash flow on
1:05:05
their own. And so, yeah, it's just it's
1:05:09
kind of confounding like and and this is like this, this is the
1:05:13
gymnastics that sells like research analysts kind of go
1:05:16
through where if they want to get a particular like stock
1:05:20
price target, they have to, you know, play with the numbers
1:05:22
here. What's interesting is like the
1:05:24
guy took 2028 numbers and based it off of that.
1:05:28
But then if you look at his, you know, just a handful years out,
1:05:32
basically the, the 20. I mean, if you, if you were to
1:05:36
tell someone like, hey, there's a company that in 2028 is going
1:05:41
to go within, what is it five years, it's going to go from 3.5
1:05:45
billion of free cash flow to 17.8 billion.
1:05:47
Like people be people would be climbing over one another to try
1:05:52
and invest in that company. I mean, that's a tremendous
1:05:54
amount of free cash flow growth. I mean, I guess based off of the
1:06:00
valuation here, he's showing a free, free cash flow yield at
1:06:03
45.9%, which is insane. But anyway, yeah, it's, it's
1:06:08
funny because like the guy argues that the company's fairly
1:06:12
valued at these levels. I guess based off execution,
1:06:15
resident Starlink is going to crush them and they're way
1:06:18
ahead. But then in his own model, it
1:06:21
tells you something completely different, right?
1:06:23
Because like, if you truly believe these numbers, a
1:06:28
evaluation of 4445 to $55 doesn't make any sense.
1:06:33
But anyway, let me see if there's anything else here.
1:06:38
Yeah, I mean, at the end of this report, he kind of reiterates
1:06:41
some of the same things, like uptake in Japan seems pretty
1:06:45
low. But again, you know, you're,
1:06:47
you're comparing a text messaging service with some
1:06:50
sporadic data to broadband and that's in Japan where, you know,
1:06:55
the saturation is pretty high in terms of like cell coverage.
1:06:59
And then let's see here. Yeah.
1:07:04
And, and T-Mobile like he, he says there specifically he talks
1:07:08
about like how US direct to cell adoption has been low.
1:07:12
And then he then he specifically says your T-Mobile did not
1:07:16
provide any numbers in their release.
1:07:18
And so I don't, I don't know where he's getting the, this
1:07:22
notion that direct to sell adoption in the US is been low
1:07:27
because no one's disclosed that. And by the way, like, I guess
1:07:31
going back to my, my skiing example, when I was with the
1:07:35
family, I tried to use the Apple service and I, I don't know
1:07:39
about any of you guys, but I couldn't get it to work.
1:07:41
I don't, you know, and, and this is not somebody's like being
1:07:45
biased against it, but I tried to connect to it and I tried to
1:07:48
send messages and maybe because I was moving too quickly on the
1:07:52
ski left or something, it, it didn't work.
1:07:54
But to this day, like haven't got to work.
1:07:56
So if anybody has got Apple SOS or messaging to work, I'd be
1:08:01
curious to your, you know, your, your experience on that.
1:08:04
But anyway, we are now an hour and 10 minutes and my son should
1:08:08
be done at soccer. So I'm going to end it there.
1:08:11
But yeah, thanks everyone for joining.
1:08:14
Hopefully that was like somewhat educational, not just about just
1:08:17
the research report, but kind of how the sell side business works
1:08:21
and and how these people can be influenced unduly, whether you
1:08:26
know, that's that's for your own names or for people who are
1:08:28
working against you. But clearly the report today, it
1:08:32
was a was a hedge fund short selling, you know, driven type
1:08:38
of downgrade and, and the the reasons for it we're we're
1:08:44
unjustified, at least based off the content that I saw.
1:08:46
And and there's been a number of people in space mob.
1:08:49
We've written about the report and I think I've done a pretty
1:08:51
good job as well. So So yeah, I'll end it there.
1:08:55
We'll see what the next two weeks brings and I'll do another
1:08:59
space hopefully soon. One thing that I promised to do
1:09:02
was to summarize, you know, 2025 and and kind of also talk about
1:09:08
what to look forward to in 2026. I have yet to do that, that
1:09:11
space. And I was also going to announce
1:09:16
some of the award winners that from red rums, all that he had
1:09:20
put out. He hasn't published that yet
1:09:22
because he was hoping that someone would actually go
1:09:24
through that. Maybe, maybe it'll be Kook or
1:09:26
it'll be myself. But but yeah, thanks everyone
1:09:29
for joining and we'll talk again soon and take care.
1:09:34
Thanks for listening to the AM AST Space Mobile podcast.
1:09:37
If you enjoyed this episode and you'd like to help support the
1:09:40
podcast, please share it with others, post about it on social
1:09:44
media, or leave a rating and review.
1:09:46
To catch all the latest news about AST Space Mobile, make
1:09:50
sure to subscribe. Thanks again and I'll see you
1:09:53
next time. We're doing something very, very
1:09:58
big and I think with this technology we can really affect
1:10:01
billion lives. AST Space Mobile is the only
1:10:04
company that has proven technology to deliver cellular
1:10:08
broadband connectivity directly from space to do everyday
1:10:12
smartphone. People will just basically turn
1:10:15
their phone and be seamless, regardless of where you are.
1:10:18
We don't want the user even to know that it's connected by
1:10:21
satellite. Our role is to bring this into
1:10:24
reality, always in partnership with the animal.
1:10:33
Listen, Waffles.