AST SpaceMobile 8-K: Change of Control Severance Explained

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[00:00:59] Speaker C: Hey everyone, thanks for joining tonight. I am firing up a space to talk about this 8-K that was filed for AST SpaceMobile after the close. Uh, for those that saw it, um, this was a change of— change in control severance agreement which applies to senior executives. This is a Bell Scott, EVPs, SVPs, and some other senior executives. And what this does is it puts in place a change of control severance package for any employees in a situation where here, you know, you have a double trigger. One trigger is a change of control. So if the company experiences a takeover of at least 50% ownership of the company, which is typically just a full takeout, then that would be one trigger. And then the other trigger is that you are terminated without cause, or terminated without cause, or there's other factors. But in that case, you would receive a multiple of your salary and healthcare benefits. I think it's like 18 months or potentially 24 months depending on who you are. And you get your stock, would vest and accelerate. And so typically companies put these in place to incentivize employees to stick around during an M&A process, but then also to stay at the company afterwards. Because oftentimes when you go through these processes, there can be uncertainty and employees may decide to jump ship and go somewhere else if they think that there's no future at that given company. And so during the pendency of a deal, you want to incentivize them to stick around and, hey, if you get terminated without cause, like we decide that you're redundant, then you're going to get paid out for sticking around. And here, for a company that's buying another one, you don't want people leaving, right? Because essentially when you buy a company, it's the people that you're buying. Aside from the assets, but you want to incentivize them to stick around. And then of course, the acquiring company will probably re-up everybody with compensation for the people that they want to stick around. And so yeah, this is something that you typically do to keep people incentivized during the process. And it doesn't have to be M&A related. It could be, which I'll talk about in a bit, but you would put these in place if you think that you might be talking to strategic partners for joint ventures, strategic investment, but you want to make sure that executives are incentivized to be indifferent to whether those discussions end up being a joint venture or some type of partnership or even an M&A outcome where the company is sold. But yeah, so from my experience as an M&A banker, when you do have M&A, one of the critical aspects is making sure that you keep the employees, especially post-transaction. So in the end, as I was mentioning before, what are you buying if everyone walks out the door prior to or after the deal? And so oftentimes you'll see these agreements being put in place during an M&A process, or rarely does it happen kind of at the late stages of an M&A process. But if you think that there is a possibility, say several months out, that something could happen, then typically a board will put this in place. And oftentimes companies may already have these in place and they might be individual agreements with employees, but they may not be standardized across, let's say, C-level and upper and mid-level management. And so as you get, you know, further down the line and you think that there is this possibility that something could happen, and then it's good corporate governance for the board to put this in place. Now, you know, for people who've like used AI and researched this quite a bit, this could be just housekeeping, right? So oftentimes as good part of good corporate governance, companies will put this in place unprompted. But in my experience on the public investing side, I actually made quite a bit of money in my career researching companies that after seeing 8-Ks filed with change in control provisions put in place, especially double triggers, that would lead me to research that company a bit more deeply. Oftentimes, I mean, it's not a 100% signal, but a higher percentage than you would think would then, months later, even sometimes weeks later, you'd find out that they were in a sale process or a deal would get announced. There's actually event-driven research firms out there that monitor this stuff. Of course, with the advent of AI, I'm sure a lot of hedge fund guys do this already, just have a monitor looking at filings all day. But yeah, there are firms that focus on these types of filings as a way to alert people to, hey, you should pay attention to this company because if it makes strategic sense for this company to transact and potentially get acquired, this is a breadcrumb. This is a a piece of the mosaic that you want to become keenly focused on because something may or may not happen. Now, obviously, you might have discussions and they could be exploratory and then nothing come to fruition. And so we could be looking at ourselves months from now and some people might scratch their heads and say, well, I thought maybe something was supposed to happen. Well, Well, first of all, I would put the probability of Abel selling the company as very low because I think we are at a very early stage of executing in what is a big opportunity. And I don't think Abel would sell at this stage. Perhaps later, if the company has several shells deployed and billions of subscribers, then maybe you'd contemplate it. But then, of course, everybody has a price. And so could he contemplate something, or is there something to prompt the board to put this in place? There might be inbound interest, and as a result, as a fiduciary, the board has to evaluate those offers. Now, as people have pointed out, Abel has effective control of the company with his high-vote stock. And so ultimately it's his decision. even if Google came in with a $300 offer and Abel decided now was not the time to sell the company because he thinks it's undervalued, then that would be the end of discussion. You or I would have no say in it. Now, there might be activists who raise a ruckus and say, hey, you should sell the company, and risk-adjusted, that's a great price, but there's nothing they can do about it because Abel has full voting control of the company and Actually, when the company went public via SPAC merger back in 2021, the voting structure, the voting, Bell's high-vote shares, that was actually put in place as a protection for the company because there was inbound interest in acquiring the company back when it was private. So there was this foresight of, hey, we need to put in protections for the company so that the company will have enough time and latitude to execute on its mission, even if things get rough, so that a shareholder activist like Jana Partners or Carl Icahn can't come in and try to force the company to sell if it's down on its luck, which by the way, that happened in 2022, 2023, 2024. If that structure wasn't in place, you would've saw a shareholder activist come in and say, hey, you guys should sell the company, but also to keep interlopers at bay. So given the strategic importance of the company, you don't want someone accumulating 5%, 10% of the company and then trying to run a proxy fight and replace the board and take over the company that way. So with Abel's high-vote structure, you keep the company safe and ultimately it's up to him. So if he decided one day, hey, I've had enough, all these guys on Twitter keep roasting me, I'm done with this, then he could decide to sell the company. Or if he truly thinks that the opportunity is what we believe it is, then he's going to continue to soldier on, unless things change and there's a reason to do a merger. or sell the company. But yeah, today I would just say that this is an interesting nugget and there's actually a lot of pieces around it that make it very— I would say the implications of strategic activity to be very high. But does that mean that the company's going to sell itself? No. I think the probability of that is still pretty low. However, from these different discussions, you never know what's going to happen. And so something prompted the board to put this in place. And now I'd say that some folks had said on Twitter, well, this can be just part of good corporate governance. Sure, that's right. And if it was on cycle, meaning after the board typically, I guess in previous Previous board meetings, there would be an approval of incentive packages, and then those would go up for vote. But when I looked at the prior cycle of these things, today's action is actually off-cycle. So it's not something that appears normal. And so it doesn't necessarily say something strategic is happening, but it is a bit peculiar in that way. But going back to what I was saying before, you know, something prompted the, prompted the need for this implementation. And so, yeah, it's, it's pretty interesting. So we can talk a bit about what, what did that mean? Like, what, what would prompt this, right?
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[00:13:00] Speaker C: But I would say that I would preface everything by saying, if the company is having strategic discussions around, and whether that's joint ventures, we've got something going on in Japan, we've got something going on in Europe, we've got something in the US. And so there's material discussions there with each of these players, and those discussions can lead in all kinds of different directions. There's also potential for strategic investments, partnerships, and maybe some level of M&A, right? And it doesn't necessarily have to be inbound. It could be outbound as well, right? So maybe AST is interested in buying grain management spectrum, right? So they, as a result of doing that, you know, that creates some strategic interest potentially for maybe someone to acquire AST, right? once they've locked up that low-band spectrum. But I think the key thing is that when you're having all these discussions, you need to make sure that all the executives and senior folks are covered so that they are indifferent to one outcome versus another, right? And so that's another reason why you would put these severance packages in place. But yeah, the timing of this package is very interesting. As folks had pointed out earlier, and I'd written about this, I guess it was at the time that he was hired, but Ozzie Ramos, who was formerly the vice chair of Barclays Investment Banking, and he covered the TMT sector, and then he moved over to UBS and was vice chair there. And so I believe he may have overlapped a little bit with Scott when he was at Barclays, but the interesting thing about Ozzie Ramos is that he is very steeped in knowledge and has relationships in the telecom sector and also the space sector. So one of the deals that he worked on was actually Viasat's acquisition of Inmarsat. And so he knows a lot of the players in space. He also knows all the telcos. And so this guy was hired in early August. Again, a very senior UBS banker decided to leave and he's joining this satellite company. For what reason? We were all scratching our heads and figured at the time, I thought, well, hey, They're negotiating this US JV, the European JV, and the Japanese JV. This guy is the type of person you'd want to bring in, but there's also other things that are going on. So people have speculated around Meta, Microsoft. We know that the company's had discussions with Microsoft last year, and somebody this evening just told me unsolicited that they believed that there's been recent discussions as well. And then of course, Google is a strategic investor. They're a partner of AST. We know that those discussions have been happening. And then of course, Blue Origin, Amazon. Blue Origin, the executives are close with AST. I don't know if there's any discussions with Amazon, but there would be obvious reasons to potentially work together, to leverage and utilize Globalstar's spectrum properly. But yeah, the list is extensive. I mean, Remember, OpenAI was looking at investing or acquiring Stoke or potentially another launch provider, and so all this stuff is converging. But yeah, so Ozzie Ramos was brought in in early August, and then of course now, approximately 2 months later, you see this change in control severance package put in place for everybody. However, I would balance that out by saying that Adriana Cisneros bought shares open market on August 31st. And so whatever has been happening isn't to the point of materiality, where it would keep her, it would preclude her from buying shares in the open market. Now, obviously, if there was something material, like the company was selling itself, she probably couldn't buy shares. But if there were some initial discussions and exploratory talks, but nothing really material, you'd have to ask your corporate M&A lawyer, you could buy shares, right? But is something imminent? Probably not. But could something happen in 2 months, 3 months? Yeah, possibly. But yeah, as I mentioned before, the plan was adopted today. So 2 months after Ozzie was hired, a month after Adriana bought shares in the open market, I did some research, as I mentioned before, asking ChatGPT, was it off-cycle? According to the analysis, this adoption does appear to be more standoffish off-cycle. Again, this doesn't seem like it was housekeeping, but I mentioned it before, some of the executives individually did have severance agreements. They didn't have the exact same structure. But, you know, and then for example, Abel didn't have one in place, but by putting this in place for all the executives, it makes for, you know, an interesting data point, right? So what would it look like if it was M&A? And so as I mentioned before, in my previous life as a hedge fund event-driven a long-short guy, whenever you would see these 8-Ks filed, it didn't necessarily mean that something was going to happen, but oftentimes if you did spend the time and dug in and whatever company had filed it, oftentimes there would be a case for the company to be sold. It had strategic value, maybe it was in a consolidating industry, maybe some of its peers had been acquired. And I'll talk a bit about that in a moment. But once you saw this, you would say to yourself, hey, I should probably spend the next day or two and dig into this company and see if there's any reason why they're putting this in place, and if indeed there is a possibility that it could be acquired. And so what makes this AK interesting is that if you look at the industry, what has happened, right? So SpaceX acquired EchoStar, and then you had Amazon acquire Globalstar, and then you had Rocket Lab acquire Iridium, right? And so you do have industry consolidation, right? And so there's strategic discussions that are going on. AST was probably part of some of those discussions as a potential acquirer, and then maybe it's had inbound interest as well. But let's just focus on Iridium. While people are like, hey, I think this could just be good corporate governance, like housekeeping, in Iridium's case, it wasn't. Rocket Lab, if you go back to the merger proxy, Rocket Lab first raised the potential of an acquisition on January 8th. They had some initial discussions before, but And that was, I believe, at a partnership level. But on January 8th, Rocket Lab, they put forward a proposal to acquire Iridium. And then they circled back on January 27th, and then the parties agreed to sign a non-disclosure agreement so that they could conduct real due diligence. And that was February 6th. And so here you have a process where, and this shows you the level of materiality, right? You have a process where someone's indicated they're interested in buying the company, you sign NDAs and you start wholesome, real discussions, due diligence. And so interestingly, on February 26th, that's when Iridium's comp committee put in a new executive severance plan that enhanced the CSE benefits with double-trigger payouts. And so here, after the companies had some level of discussion and at that point the board was like, hey, this is pretty serious, We need to make sure that we incentivize these executives who are taking part in these discussions, that they are going to stick around and are protected. Because if you get acquired by a company and you have all these, let's say, stock options, one of the worst things that happen is if you don't have protections, a company could come in and say, hey, we bought your company. and we don't need you anymore, you're fired, and we get to keep all your stuff that's not vested. And so that's what double trigger is for, where they can't come in, buy the company, and just fire you willy-nilly just to save money. Because if they let you go without cause, meaning you're being let go because of redundancy, not maybe they caught you embezzling money or something, then your options accelerate, right? So you get paid, you get like multiple of your salary. You also get COBRA for 18, 24 months, whatever it is. And then you get all your equity comp. It accelerates and vests, and then you can sell that. And the reason why you do that is you wanna make sure that people are, they feel safe and they're protected and that they also will help you through the merger process, right? 'Cause for a lot of these things, for example, it can take a year to close, 6 months. And they don't want key people to just leave. And oftentimes, I mean, and then in the bad situation, if a merger doesn't close, you're left there with no deal, and then some of the executives have already left, and then you've got to basically pick up the pieces and rebuild. So here, in Iridium's case, they put this change of control severance plan in place once discussions with Rocket Lab were going at some point the board deemed them as serious and it was going to get to a potentially, there would be a transaction. It was 4 months later. So after they put in that executive change in control plan, it was 4 months later that then the deal was announced. And so I think it was announced on June 30th. And so when you go back and you look at how Iridium framed that plan, they specifically mentioned that they wanted executives— so when they filed the 8-K with that plan 4 months before the deal was announced, they wanted to ensure that executives remained focused on a potential business combination rather than their own financial security. And so they wanted to keep them incentivized and see it all the way through. And similarly here with AST, there was some language today about making sure in a change of control transaction that executives are properly incentivized. So yeah, there's a very specific example in the industry, which probably to some extent prompted this package to be put in place too, because you have an industry that's consolidating and there's a whole host of strategic discussion that's going on. And so I think the board as being being proactive, put this in place because you never know ultimately where these discussions are going to go. So what do I think is happening? Well, I think the company certainly is talking to a whole host of different parties. That could be just around partnerships, as I mentioned before, joint ventures. There could be strategic investment as well. And yeah, pretty much everything is on the table. So Does something bigger come out of it? Who knows, right? Again, I think it's a very low likelihood that AST would sell here. I think the company believes that it's undervalued. Obviously, there's been some execution. Things have taken longer than they expected. And for those that don't know and have seen some Space Mob people being pretty bullish about things, I think We are going to see some type of PR soon about the satellites being shipped, and you know they're on their way to Florida as we speak. But but yeah, I mean I think there's a whole host of things that could be going on right now, right? So let me just kind of lay out some of the the the the discussions that are happening. So first, AST is having strategic discussions with MNOs. So that includes T-Mobile and Deutsche Telekom. These are the 2 new players, which would be game-changing. So by adding T-Mobile in the US, that gives you 100% of the US market. By adding Deutsche Telekom in Europe, you've basically locked up the big 4. Then that's on top of AT&T, Verizon, others. In particular, the discussions are really centered around these joint ventures. Joint venture in Europe, joint venture in the US, joint venture in Japan, and so on. In the US, I think those discussions could be quite interesting because I think the structure, as discussed by AT&T, Verizon, and T-Mobile, there's going to be potentially some contribution of spectrum rights, infrastructure, maybe they capitalize the JV. Do other things get contributed to that JV? For example, if AST wins the grain management solicitation to light up that spectrum, does that spectrum get contributed to the JV? Or does the JV actually— does it get capitalized? Does it make a strategic investment in AST to make sure that the JV and AST and the MNOs are all aligned? Who knows? But anything is possible. I think we'll find out in the next few months what comes of it, which I'd say one issue, of course, is that the MNOs move pretty slowly, as Cook mentioned in his space yesterday. However, the party that they're competing with, which is SpaceX, does not move slowly. So I think the MNOs have found a new religion, As a result, I think that JV may come sooner than we think. Maybe it comes before the end of the year, and we'll find out the details of that. How's AST going to work with the JV? What does it mean that AST has separate definitive commercial agreements with AT&T, Verizon, and also T-Mobile? Then it has an agreement with joint venture. How does that work? We'll find out, right? But that's why you bring in a guy like Ozzie Ramos, and who has relationships with all those executives. It also helps that you have Chris Sambar, formerly AST board member and network planning committee member over at T-Mobile, who's head of enterprise now. So yeah, there's— I'd love to be in the room Like when Scott and Abel are talking to T-Mobile or, and some of these other companies, like for me, I'm just fascinated to find out what they're cooking up. Let's see. So other areas, I mean, you've got SpaceX and Tesla being this vertical stack now. I know people on X like saying the entire stack, vertical stack. Who does that threaten? Well, pretty much everybody. So let's just take you through the list. So Blue Origin, Amazon, at some point Blue Origin and Amazon, even though they operate separately and they're not stepping on each other's toes, at some point they should combine, right? Just like what SpaceX did with X, Blue Origin and Amazon at some point at the right time will combine. And I think within that vertical, framework, there's no direct-to-device capability. Now you have the old Globalstar, but in order to properly utilize that spectrum, you need better, more robust satellites. But beyond that, we're talking about AI data centers in space applicability. So AST has large 100 plus kilowatt generating satellites up in space. There's a whole host of reasons why a combination with Blue Origin and/or Amazon would make sense. Actually, the synergies that you would get from combining with Amazon, where you would utilize Bluebird satellites, you would just basically light up Globalstar spectrum, that could make sense, right? But who knows? And interestingly, Blue Origin, I've read, similar to probably the articles you saw, Blue Origin is poaching some employees from Amazon Leo. So I'm not really sure what's going on there, but Blue Origin, of course, they have Terawave, which is more enterprise-focused, and then Amazon is trying to develop their own D2D capability, which pretty much everybody is. So you could get there much faster, which is what the plan, which is what Rocket Lab did. They tried to, they talked about deploying or having a constellations business and they wanted to get into communications. And as a result, instead of developing it, they just bought it. So Blue Origin and Amazon would make a ton of sense. I mean, ASD is one of Blue Origin's biggest customers. And so having that having that merger go through would make a lot of sense. Another party would be Google. Google owns the OS in Android handsets. It already works closely with MNOs. So how do you boost your strategic importance to the MNOs? You actually not only provide the operating system for their phones, but you provide the satellite connectivity layer. So Google, I think, would be a pretty non-controversial partner for the MNOs to work with. And so in terms of business model compatibility, I think Google and AST would make a ton of sense. Now, for all these companies, by the way, if you had the likes of Amazon, Blue Origin not so much, but Amazon or Google take over AST, then you would reintroduce some of these sovereignty issues, but I think you can work around those with these JVs. But yeah, I mean, Google also has the Eric Schmidt connection. So Relativity is about to have their first launch soon here. And so there you've got also a launch platform. And so you could make the case that ultimately Google, what they're doing with Planet Labs, there's a whole host of reasons why they might in terms of strategic fit, why doing a deal with AST could make some sense. By the way, all these players, they don't have to buy AST either. They can just make a strategic investment. There could be some deep partnership, but I'm just ticking through these. For Meta, Mark Zuckerberg has always had this idea of bringing internet connectivity to the unconnected. If you think about their HAPS platform where they were going to do these high-altitude balloons or gliders that would provide internet connectivity 24/7 over these underdeveloped regions where, of course, Meta wants to get more and more people connected and control that mindshare, well, you could do that with satellites. I think Abel and Zuckerberg are aligned in that regard of bringing connectivity to the unconnected. And so that, and then when you think about what they've done with Muse, the personal AI assistant, and the proliferation of what they want to do with devices and connecting those devices, there's a lot of strategic rationale as to why that can make sense, which I think Cook tweeted a little earlier that would be his bet. But yeah, I think Meta could work. Microsoft. Interestingly, last year we had heard some rumors that Microsoft had met with AST, and then there's been some talk recently of meeting as well at the highest level, so between Abel and Satya. I'd have no way to confirm that, but Why would Microsoft work with AST? Well, interestingly, there was this initiative announced with OmniSpace, which for those that don't know, OmniSpace is a company that owns priority rights to some S-band spectrum globally. But Microsoft had been working with OmniSpace focused on this architecture where the satellite D2D network would combine with Azure ground infrastructure. So for those that don't know, Azure actually provides a decent amount of cloud and network layer infrastructure to companies like AT&T. And so there was this idea of combining that ground infrastructure with the 5G core to route— I can't speak— to route voice and data from mobile phones to LEO satellites back to MNOs. And so You can make the case there for Microsoft, where they are focused on edge computing, connecting devices in areas like mines, farms, ships, defense, basically IoT. So you can make the case for them as well. Then of course, like any of the AI companies, where because they're competing with SpaceX and there's this big push for AI data centers in space and connectivity, How do you compete with Musk? So again, it doesn't have to be an outright acquisition, but a partnership, strategic investment, developing data centers in space, doing communications, having connectivity in areas where, especially for edge computing and autonomous devices, you're going to need connectivity in places where there is no terrestrial network or the as we've discussed in the past, where oftentimes in 1-bar and 2-bar coverage areas, there's actually no data. I found this out recently on a trip to the Berkshires where you can have 1 or 2 bars of what looks like 5G on your phone, but there's no data. The only thing that those 1 or 2 bars mean is that you can actually call somebody via voice, but if you want to check scores or or stock prices, you're out of luck. And so that's where the use case of the 1 and 2 bar areas, which is approximately for 1 bar, if you look at the terrestrial network today, I think that accounts for anywhere between 20 to 30% of the coverage area. So that's a really big TAM. That's not dead zones, but that's just those areas where you get spotty service. That's what I think will be aside from MSS spectrum where you have full coverage, but in these areas of terrestrial coverage where the network can be bolstered by satellite. Let's see. Oh, someone's saying— oh, okay. Sorry. They corrected me. Google was Project Loon, which had the hot air balloons. So I stand corrected there. Oh, so Google is interested in delivering distributed connectivity. However, it was Facebook that had, or Meta, that had the— there were these gliders, or they were going to, I believe, someone correct me if I'm wrong, but they were going to use very efficient motors, and they were just going to fly continuously and beam down 5G internet to places like Africa. So yeah, Zuckerberg did have this idea of connecting the unconnected. Anyway, but yeah, those are some of the discussions that are probably happening or at various stages. That's why I think you brought this guy, Ozzie Ramos, on board in early August. You've had the telco JV in the US forming, and who knows what other things are attached to that. So it may not just be the MNOs, but it might be some of these other tech companies as well that want to have access to that. Because ultimately, I think people will work with SpaceX, right? I mean, for example, SpaceX launches our satellites, but I think having a reliance or dependency on SpaceX, whether that's for xAI or a ride to space or any of these things, I think a lot of these companies are threatened by that. And so on the AI data center front, obviously that's been a big focus for SpaceX. What does Google do? What does Amazon do? What does OpenAI, Anthropic, what do all these players do? Now, on the one hand, you can see that in tech, often there's this thing called coopetition where you will work with competitors. So It's the old model where IBM Consulting used to sell Sun servers and HP servers and storage from EMC and some of these older companies. But of course, IBM, by controlling the customer, they would push as much of their own product as possible where they could. In tech, oftentimes you do have these situations where companies do work together, but they're obviously not— they don't fully trust each other. I mean, you see that with SpaceX where around the NeoCloud leasing business, where Google and Anthropic have basically on a month-to-month lease, they've got computing infrastructure. So they are working with SpaceX, but I think ultimately everybody wants to not be dependent on SpaceX because as we've seen, SpaceX is quickly moving into all these different niches with Tesla too, like robotics. where all these companies are gonna be looking for not necessarily an open, well, I guess more like a neutral player to go to work with, which is why it makes AST very interesting, right? 'Cause ultimately for SpaceX, they wanna get into the terrestrial mobile business. They wanna do connectivity. And it's not just about mobile phones. I mean, we've talked about this before, but if you look at mobile devices, if it's like 6 billion devices around the world, IoT is going to be multiples of that. It's Internet of Things, autonomous drones, robots. The number of devices that will be connected and require connectivity is going to grow exponentially. I think all these players are all having discussions. I think, again, going back to what I was saying before, this 8K is an interesting point in time where it's kind of like a wake-up call because everyone's like, oh my God, let's focus on when are they going to ship the satellites, which by the way, they have shipped them. And so we'll find out about that soon. But then when are they going to get production cadence up? When is the next launch? But people forget all this stuff that's happening in the background. And so I think today's 8K is a good reminder that anything could happen. I'm not saying that it will result in a sale of the company, but that's not out of the realm of possibility, which is why I did make that— I did say for short sellers, don't stick around to find out. And so even imagine what the stock would do if there was a strategic investment from I don't know, Amazon or any number of players. Blue Origin makes a big strategic investment, what does the stock do? But to me, the near-term step function move in price would be the signing of T-Mobile, because then you've got AT&T, Verizon, and T-Mobile. T-Mobile obviously is working with SpaceX, and so for them to sign AST, that would be a big slap in the face. Anyway, I'm going to pause there. Let me just take a look, see if people have any questions. Let me just look here. By the way, thank you for the comments and correcting some of the things that I said incorrectly. Let's see. We need to talk about the possibility of Blue Origin merger. Makes Blue Origin a public company overnight. I never thought about this, but would not rule it out. Yes, that's right. So if Blue Origin— so Blue Origin could do one of two things. If they wanted to stay private, but they wanted to— let's just say they wanted to buy AST, they'd have to go raise cash and they would have to buy us and they would stay private. But an easy way for Blue Origin to go public is to do a stock-for-stock deal and they acquire AST and Blue Origin is the surviving company, and they would become a publicly traded company as a result of that. It is what we call a reverse merger. So that would be a possibility. Let's see.
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[00:44:18] Speaker C: Reichardt's asking, do hedge funds take these things into consideration when making a decision to short? Yeah, they do.
[00:44:31] Speaker A: They do.
[00:44:31] Speaker C: So whenever I would short a company, you would always think about, well, what could go wrong? And if the company gets acquired for a 100% premium, 50% premium, that is certainly something that would be very bad for you if you were short the stock. And so you would look at, is the company— are executives looking to sell the company or Obviously, if it's in a sale process, then you probably wouldn't short it unless you thought the company was overvalued or that the sale process was not going to be successful. But yeah, for this 8-K to get filed and people, if you're a hedge fund that's short in size, you certainly would look at this. You might listen to this space as well. But if it's a small short position, like let's say it's part of a basket and it's only, I don't know, a percent or half percent, you may not really care. So you might just stay short. But yeah, it's certainly something to consider. And it's also for hedge funds as well. It's something to consider if you want to go long. And so I did— let me just see. I wanted to talk about this. There has been someone out there. Let me just look. This was a post on Whale's Flow Radar where somebody has been absolutely slapping the ask on calls. And so on September 25th expiry, they bought like $2.4 million worth of $65 calls. Let's see, October 16th expiry, there was $4.5 million spent on in-the-money $40 calls and $2.4 million on $65 calls. But yeah, this whale flow trader, and people have seen this too, someone's been spending millions of dollars on call options, right? And similarly, I think someone has been doing that with the Viasat as well. So I don't know if that's a positive indication, but somebody has certainly been taking swings. And some of these calls, for example, let's see, there's a March 27th $90 call, there's a December 27th $170 call, and then there's January 28th LEAPS $185. strike, and then there's December 28th, 105 strike. So yeah, someone has definitely been taking swings. Now, you could also argue the other way where if someone were short, you might be buying some of these calls for protection. But yeah, someone's burning quite a bit of premium on the expectation that there could be a big move in the stock. And so yeah, someone's speculating. Let's see. Dear, let's say, uh, hey Antpan, thanks for your time and thoughts. Given the length of silence and that BB14 through 17 are late to ship— actually, you mean 14, 15, 16— would you be willing to give us a sense of your personal range of possibilities of what's going on from bullish to bearish and relative weights where you'd place them? Well, um, we've talked about this before. Uh, the something has come up, something did come up in testing for for BB-14, 15, and 16. And so the company, you know, testing was successful. They found something, they went back and they fixed it, and then they had to test it again. That takes time, right? And then on top of that, you had what hopefully will be the crewed mission for Falcon 9, the Dragon capsule on October 1st. That also shifted around the timeline, but I can tell you that based off of Space Mob due diligence, 14, 15, and 16 are in process and being shipped as we speak. So that's what happened. Shit happens, right? With space, I think Kukan mentioned it before and I retweeted it today, which I thought was really good, was this Elon Musk quote from the book From one of the books that Cook read, Elon Musk, his quote is, I'm a specialist at turning the impossible into the merely very late, which I think is applicable to AST and any number of space companies. So if you're doing something that was deemed and viewed as impossible, which is, oh, hey, I'm going to create a massive satellite that can speak to an unmodified phone and deliver broadband, which people thought was absolutely nuts, only a short, you know, 5, 6, 7 years ago, it's gonna be hard, right? And so that's what we're— what we've had to deal with. I know some folks have handled it a bit better than others, but that's what it is, right? Like the process to test these satellites, they came up with something, which is what you hope, right? You hope that you have a wholesome testing process that catches issues and you fix them before you launch satellite. And so that's what we have. And now the satellites are on their way to Florida. Let's see. So, oh, I guess to answer your question, I'm bullish. I think it's, you know, the company is ironing out the production issues and yeah, it needs to continue to ramp up and execute, right? And I think, you know, obviously, People don't like delays, right? And with delays, it costs more money. And you also have the ability, the risk of getting end-arounded from a strategic perspective, right? People are worried that, hey, Starlink today, they launched several V3 satellites. And so people are asking, well, what does that mean for the direct-to-cell V2 satellites? Could those be coming pretty soon?
[00:50:21] Speaker B: Yeah.
[00:50:23] Speaker C: They absolutely can. I think one of the things that people forget though is that there is this business model incompatibility. Starlink is now competing with all the major MNOs. I think Starlink will sign some of these smaller players because it's going to be a key point of differentiation for them and allow them to get more subs. They'll trade that off for ultimately losing the customer over the long run, but that's a trade they're willing to make. But I think for AST, they've got to put up the constellation in a reasonable amount of time and do that in such a way that the constellation's working, they don't have any major issues, but it's not really a direct race against Starlink, right? Because I think Starlink kind of shut down the strategic opening on themselves. They originally were like, hey, we're going to work with all the MNOs and we hope that you come with us. But then they bought Spectrum and said, hey, you know what? We're actually going to compete with you. So the alternative is either work with Starlink, they're going to eat your lunch, take your customer, or work with AST, even though they're in this production hell and it's going to take time. Right. And so yeah, I'm bullish, but as I mentioned in an earlier space, I think it took Tesla an entire year to get over production hell. I'm not saying it's going to take that long for us, but it sure feels like it, right? Like we're probably, as of what, I think the last update, we're a month behind. I know someone had posted a chart and said, hey, management are liars. And they posted the cadence, production cadence and launch, and it's like, well, we're only a month behind relative to that schedule. Now, are we 6 months behind a schedule that was released before? Yeah, we are. Did other things happen, like Blue Origin blowing up on the launch pad? Yes. As a result of that, because of how much launch we have booked with SpaceX, Did we need to get to 6 satellites per month by now? No, because we don't have Blue Origin. And so there's, that would be somewhat of a silver lining, right? That because of Blue Origin's issues, we are able to take a little more time in terms of ironing out the production issues that we have.
[00:52:58] Speaker A: Let's see.
[00:53:02] Speaker C: Love to hear your thoughts on Meta. I think it hurts the data sovereignty piece. Europe is the obvious problem, but also Japan, Saudi Arabia, India, African markets, defense customers, basically any government that wants domestic control over communications infrastructure. Okay, so what you could do is you continue what AST is already doing, right? Let's say Meta does buy AST. You still have the JVs, uh, The respective country, whether it's Europe or Japan, they have the kill switch, they have the control and operations center in their respective regions, they actually own the constellation, and then Meta will lease capacity once those satellites go outside of that area. So is it as clean of a setup? Not, probably not, just given governments' concerns around big US tech. But I think you could still get around it. I think— sorry, I think you could form and organize a JV to address those issues. Let me see. All right, I'm going to refresh this one more time to see if there's any other questions, which there are. Okay. In the case of a merger acquisition, is there a legal structure that still makes Abel at the helm? I mean, over 50% of the vote for AST business unit. No, unless it's a strategic investment where AST stays public. But yeah, if someone were to buy the company, they would have to structure something that would give Abel control and satisfy him. So you can do that in any number of ways. I mean, look at Facebook today. They just hired the CEO of MongoDB, which is pretty insane. The guy was there only for a year. So you can incentivize people to stick around, but I think sometimes in the past people were like, well, what if American Tower or AT&T acquired AST? I think the issue with a transaction like that is how do you incentivize someone to stay at a dynamic startup, high-growth startup, culture type of company within a slower growth, more stuffy corporate environment, that would be kind of tough to manage. And then I think in particular for an MNO, I don't think they could acquire AST because then once you do that, you lose some level of neutrality. So if AT&T bought it, then Verizon and T-Mobile would be like, oh, I'm not sure I want to work with these guys. You could similarly say the same for MNOs globally. Although I guess what could change that or what has changed that dynamic is the bigger threat of Starlink. So maybe they'd be okay with that. Did I hear you right? The satellites already shipped? Yes, you heard that right. So based off of SpaceBob due diligence, the satellites have been loaded and they're on their way. Let's see. If purchased, what range would you estimate? That's a good question. The company thinks that at the current price, the stock is undervalued. So some premium on top of the current price is probably not going to do it. And selling at this level too, with the stock price beaten down, and obviously the company's had delays, probably not the best time to sell. So I would think that perhaps if the company stock price, you would announce some— you have production that's humming and you have a few successful launches and your path to commercial service is very clear at that point. And let's say the stock is trading at, I don't know, 100 or 120. $25, then maybe like if someone offered you a really big premium on top of that, then you might consider it. So I'm not saying like someone's going to pay $200 for the company now with the stock at $61, but the company might wait for the stock to rebound and then do a deal then. But who knows? Let's just look at some examples here. Globalstar, for example, once upon a time, and by the way, for the people who did well in Globalstar, congrats. That was an amazing transaction. Globalstar traded at essentially $15 to $20 for the longest time. And then once AST, the big thing that kickstarted everything was the Gato transaction that basically rerated the sector. When AST their deal with Ogado, and then of course SpaceX came in and did EchoStar, and then it was off to the races. So here you had Amazon pay essentially 4 times what Globalstar was trading at standalone. So they were at $20 and they were taken out for low 80s. So yeah, I mean, that's the type of movement you could see with AST. I mean, I think $200 to be low, which is why, again, I don't think a deal is going to happen near term, but who knows, right? I mean, for Iridium, let's see. At one point, Iridium was trading at $15, right? And then Rocket Lab paid over $50 for them. Iridium was trading at $15, kind of under $20 over 2025 when people had questioned the impact of direct advice on their business. So that's a pretty hefty premium relative to where they were standalone. Even if you look at Viasat, which was left for dead, Viasat used to trade at $8 to $10. I mean, it was like a distressed company and it was again, once Legato transaction happened and that $500 million payment went from AST to Legato, which then went to ViaSat. They paid off some debt and then people were like, oh, hey, the spectrum might be worth something. The stock rerated, right? Went from $10 to now as high as— it went as high as what? $90s? In the $90s, but now it's at $75. So yeah, all these companies were undervalued relative to their strategic importance. And of course, a big part of that was spectrum. So AST owns Ligado Spectrum, which is probably what, worth $15 to $20 billion once it's deployed? AST's market cap today is what? Let's see. We are now at $23 billion. So you're basically getting the rest of the business for On the enterprise value, we're at $25 billion. So let's say Legato's worth, I don't know, $20 billion, then you're getting the rest of the business at $5 billion. That includes the defense business, it includes all the M&O relationships, includes the 3,900 patents, the satellites that are up there. So yes, of course, it's not as if the spectrum itself, you can value it at $20 billion, because it takes money to get there, because that would be the value of it if it's utilized and deployed and it's unencumbered. There's obviously still some legal issues to work out with Legato, but yeah, AST is really cheap. So yeah, I think for a belt to sell, you're probably looking at something well north of a 2 randall. And so that's why I started this discussion with, I think it's very unlikely in the near term Abel would sell. Let's see. So Crispy's asking, outside of being acquired and proactive management, is there other scenarios where this type of protection would be beneficial? Let's see. Not really. I mean, part of it is you— so let's say you have a company and you have these executives and you're entertaining all kinds of discussions and you have maybe some senior VPs and they're like, hey man, I had a meeting with Google the other day. The company wanted me to tell them everything that we're doing. Then Meta came in the other day and I told them everything we're doing. Then Microsoft's coming in. What's going on? Are we selling the company? If that's the case, I don't know if I want to stick around. So you would you would put these measures in place to say to that employee, hey, regardless of the outcome, we might be doing a partnership, we're not necessarily considering a sale, but we want you to stick around. We want you to be incentivized to, regardless of who it is, we want you to be indifferent to the outcome. This is just a partnership meeting, or even if we sell the company, do your best. Don't try to sabotage this. And so That's why you would put this type of protection in place. It just gives people a peace of mind, right? And so, but you don't put it in place if there's nothing going on, right? Like, if there's no strategic discussions or activity, you wouldn't just put this in willy-nilly. You would put it in typically because something prompted you to do it, or you were at a stage in the company's lifecycle where it's like, hey, we've gone from a a little startup to this bigger company, we're having all these discussions, who knows where they're going to lead, we should have these for all the executives, right? And so, yeah, that's outside of being acquired, proactive management, if there are just strategic discussions in general around joint ventures, investments, things like that, you would want to have something like this in place. Okay, so with that, I think that's it. Those are all the questions. So those are, Those are my thoughts. We'll see what the next few months bring. It's a very exciting time. As I mentioned before, there's the satellites. We're now in this process of being shipped, and I think the next batch is probably close to— I mean, who knows how close is it? Is it imminent? Is it soon? But we'll probably see a launch in October. and maybe 2 launches in November. We'll see. But yeah, there's a lot of things. Again, the day-to-day back and forth choppiness on the stock, and of course macro, it's like the Iran headlines. I know people get tired of them. It's hard to stay focused, right? And yes, production to me and to other people, Production, they'll eventually get there. Like, it takes time and there's things that they gotta work out. But the key thing is that they're making progress, right? And they're putting more satellites up in space. And for Blue Origin 11, for people who are worried about that, it looks like that's been unfolded. And whether that was part of a controlled process where they were trying to get additional data and learnings, maybe perhaps they did, you know, they did— They did orbital arrays in a bar configuration, who knows? Or maybe they did have issues. Kuk and I were talking about this earlier today. It's like, for all these people who want PR updates and communications constantly, do you want the company to tell you? Let's assume something bad did happen. Would it be good for the company to say, hey, so far we've been unable to unfold BB-11 and we're working on it? Do you think people would really want to hear that? If, for example, in the engineering process, there's always contingency plans and if a satellite doesn't open up properly, there's things that they can do to ultimately get there. Do you want the interim update that something bad has happened or do you want to let the engineers work it out? Right. Which ultimately they get to a positive outcome and they're like, okay, we have successfully deployed satellite. Be careful what you ask for. Anyway, but yeah, I think there's a lot on the horizon that could be very game-changing, and I think it's important to stay patient. It's hard also, I mentioned this before, there's some people that I've blocked or muted because honestly, it is hard to stay focused sometimes because there's a lot of noise. people who are, for their own sanity's sake, I guess, they're constantly posting about wanting updates and lambasting management. Sometimes it's hard to read that stuff or to be bothered by it. So just simplify things. But anyway, that's all I had. And oh, let's see, there's one more question. Someone's saying, regarding the latest capital raise where they mentioned M&A in the context of pursuing vertical integration of launch capabilities, does that Any of that square with the idea of reverse merger with Blue Origin? Every other idea of trying to vertically integrate launch capabilities in ASTS has struck me as implausible. I think that language was put together pretty quickly. I had followed up with the company and I don't think that there's, at least from the discussions that I had, I don't think there's any desire to go buy launch capabilities. Now, is there a possibility of partnership or making an investment? Sure. Could the idea of a— would you raise money to then do a reverse merger with Blue Origin? Probably not. But M&A to tuck in vertical integration, that could be any host of things. It could be maybe they decide to bring in-house some semiconductor capability, or I don't know, something around solar. It could be any number of things, or they are going to bring in through a small acquisition composite, the ability to do composites internally. So who knows? But the company is not— I mean, I could be wrong and perhaps everything they've said over the last several years will be wrong too, but I think acquiring a launch company is the furthest thing from what they want to do. Um, if they get acquired by a large company, that would be different, right? But, um, but yeah, so those are my thoughts. But anyway, thanks everyone for joining. It's getting late. I've got to hit the sack. But, um, but yeah, it's exciting times ahead. And, um, yeah, I, I, tonight was one of the first times that I appreciated, uh, the X timeline where people are having good discussions around what this 8K could mean, uh, which has been a refreshing change from people being upset. But as I mentioned before, it seems like we're at a low, all-time low, or not all-time low, but pretty low for sentiment. Volatility is low and short interest is high. Makes for a good cake that we're baking here. So thanks everyone for joining and we'll talk again soon. Bye. Thanks for listening to the AST Space Rover Podcast. If you enjoyed this episode and you'd like to help support the podcast, please share it with others, post about it on social media, or leave a rating and review. To catch all the latest news about AST Space Mobile, make sure to subscribe. Thanks again, and I'll see you next time.
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