Anpanman - Why SpaceX Insiders are Shorting $ASTS

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And of course, there's plenty of folks wondering why the space sector has completely derated from the end of May, which kicked off by— which was kicked off by Blue Origin, New Glenn, The New Glenn 4 rocket hot fire test that caused an explosion and destruction of Blue Origin's launch pad at 36 SLC 36, and so from that event you've seen space stocks just completely derate. I think AST in particular has had a 49% peak to trough drawdown thus far. 49% as of the low today, which was around 67.87. So it's a pretty. severe drawdown relative to historic ones. But in these, with these drawdowns, you typically have some bottoming process and then a bounce. And I was commenting to some people earlier today that no matter what positive news comes out in the space sector, none of those stocks have really reacted. And so I've seen positive news come out from AST, of course, Rocket Lab, Planet. There's Any number of companies that have announced some positive news, whether it's related to defense contracts or other businesses business that's been won. But it doesn't really matter. The sector has continued to just trade down, and part of that I think of course is some amount of liquidity drain. And so people selling space stocks, maybe some of the fast money had owned space stocks for the trade into the SpaceX IPO and then sold, and then. purchased SpaceX, which if they did in recent days, they probably aren't happy with that trade. Just given that SpaceX had, I guess, traded to as high as $220 or so, and now it's at $158, which, you know, SpaceX is going to be a very volatile name just given, although the float is big in terms of dollar size, it is a very small percent of the entire company that's public right now, which is around 5%, or actually it's slightly higher than 5% given that they exercise the green shoe. But one important dynamic that I think requires a bit more drilling down into is the impact of SpaceX insiders hedging, right? And so this became a bit more, I guess I became a bit more acute to the problem when I was talking with Kook and I think he has some friends who own SpaceX stock, whether that's in an SPV Or maybe perhaps some employees, but, you know, people had been reaching out to him asking how they could hedge their stock. And I think it's important, there's an important distinction where if you own SpaceX stock in an SPV and you're a passive holder, you can certainly go out and buy puts in SpaceX because you don't, you're not subject to lockup agreements or anything legal binding you from not hedging your SpaceX stock. But then for folks who signed the underwriters agreement for the lockup, which would include all key employees, and also, and I'm not sure how far down that goes, it could be the day-to-day employees may not have restrictions around hedging SpaceX stock, but typically in an employee trading plan, they're not going to obviously allow you to go out and buy SpaceX puts. But I'm not sure how restrictive they are. They might allow you to go out and short other space names. But one thing to keep in mind is that as an employee of SpaceX, if you wanted to go out and hedge a basket of these stocks, you would probably need to go establish a relationship with Goldman Sachs or Morgan Stanley, any number of investment banks who would be able to give you some level of collateral against private stock. And so if you owned, I don't know, $100 million of SpaceX stock, you could go to Goldman, they could maybe give you margin on 30% of that, and then you could go out and short a basket of space stocks, not including SpaceX, to hedge your position and/or to monetize part of it, right? And so that's one approach, but just keep in mind, like the average employee at SpaceX, they're not going to be able to go out and short stocks because you need some collateral unless they already are sitting on hundreds or, you know, tens of millions of dollars of cash, and then they can open up any brokerage account and go short space stocks. So that would be one way you could do it. But for a majority of SpaceX employees, they're not going to be able to go out and buy puts in SpaceX because of these underwriting agreements where, because of the lockup, you are precluded very specifically from Shorting SpaceX stock or participating in any type of derivative that effectively creates a selling position in SpaceX. And so if you're Elon Musk, if you're Gwynne Shotwell, if you're some mid-level employee, even lower-level employees, you are precluded from buying puts in SpaceX. And that's just part of the legal agreement. And so if you were to go out and buy puts, you could get into legal trouble, right? And so that's why in particular, for those that are looking to hedge SpaceX stock, they can't just go back, they can't go out in the market and buy puts. This also applies to other folks who have signed the lockup restriction. And so this would include all major VCs, all major insiders. And so if you're Founders Fund or any of these other VCs, you can't go out and buy puts. And so, you know, some of these folks, obviously depending on their views around valuation or what have you, in order to bridge themselves to the lockup expiration, which the first one will be in, I think it's August 20th, and that will free up 20% of the entire shares outstanding of SpaceX. And then on top of that, if the stock price hangs at a certain level, another 10% is unlocked. And so in order to bridge people to that point, and, you know, if they want to take down any potential macro risk, they would go out and short a basket of stocks, right? And so some people have asked, well, why is AST a focus of the shorting activity versus Rocket Lab or some of these other names? And so interestingly, Rocket Lab did— the short interest did increase pretty significantly. I think it was on Friday or Monday, And if you look at some of these other names like Redwire and Planet, their short interest has increased materially, but not nearly as much as AST. So some people have asked, well, why is that? Well, part of the reason is that when you look at SpaceX and when people think about SpaceX, they think of a space company, right? But then for the folks that have drilled down into SpaceX, a vast majority of financial contribution SpaceX is the connectivity business, which is known as Starlink. And so looking at the first quarter 2026 revenue, connectivity was about $3.3 billion or 69%. Great number there. 69% of SpaceX as it was currently, you know, as of Q1. Space launch and systems was $619 million or 13%. And then X and xAI was about $818 million of revenue or 17%. So connectivity was a vast majority of SpaceX financial performance, and that was as of Q1, um, or the 3 months ending in Q1. And so 69% of revenues, um, a significant part of SpaceX as people classically knew SpaceX, uh, was connectivity. And there are very few pure-play companies that you can go out and short against, um, that exposure, one of which is AST SpaceMobile. Now you could argue perhaps Uh, you could short some Iridium. And so maybe I haven't even looked at Iridium, but perhaps some of that is baked in to a degree. Uh, you could go short. Uh, EchoStar is a very popular one, of course, because, um, that is an indirect way to short SpaceX stock. And so actually, I, I don't know.
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[00:10:48] Speaker B: If there is any legal restriction in shorting EchoStar, I actually, I should look into that. But obviously, you know, there's a whole host of people who— EchoStar is a very large market cap. It's very liquid. And so you could use that to hedge against the connectivity business because it owns EchoStar. A big part of the value is the SpaceX stock that it owns, right? And so that could be a proxy that you could use. And, you know, I guess a quick word on EchoStar. There are a number of people who are long the sum of parts trade there, but I would just point out that That one's tough, right? Because you've got, while there is the pay-TV business and the SpaceX stock and it trades at a big discount, you've got to take into account trading discount liquidity and then also potential taxes that are owed. But then on top of that, it requires a huge number of arbitrageurs to go long EchoStar and short SpaceX to close that valuation gap, right? And One thing I've learned in my hedge fund career is that when you have these large liquid situations where there's a big valuation disconnect, it can last longer and go wider than you ever expect. And a lot of people learn that the hard way with Alibaba and Yahoo, that arbitrage trade, which took years and, you know, a lot of, I guess, a lot of time for that to finally close or that deal to get done. And it was very complex. And so I think for folks who are looking at the EchoStar trade, I wouldn't, it's not something, you know, one of the key things about the, some of the parts trades is that you need a real catalyst or corporate event to unlock that value. And it's just unclear how that value will get unlocked. And then on top of that, you've got this uncertainty with Charlie Ergen, you know, what is he going to do with the proceeds if they ultimately do sell the SpaceX stock? But anyway, putting that aside, Going back to my original point, the biggest exposure for SpaceX, classic SpaceX we'll call it, is connectivity. And so that's why you've seen a huge run-up in short selling in AST SpaceMobile. And so AST, you know, when I looked at what the short interest was at around $130, which was the end of May, and then comparing that to now, we're at all-time highs even though the stock price has you know, come drawn down, you know, approximately 49%. So in that dynamic, people have to understand there's 4 convertible bond issuances that are outstanding. Obviously, the company has retired the first 2 issuances, and so there's not much remaining balance on those 2. However, you've got 2 big pieces of paper at, call it, $1.1 billion each. And so if you look at the amount of deltas or short stock that these convert arb guys, assuming that let's say they own 80% of those, all the issuances, they would've had to have covered on the move from, you know, $130 to call it $70. They would've had to have covered probably 7 million shares. And so when you compare that to the short interest when the stock was at $130 compared to now where it's like at $80, there has been— so the reason why I point that out is that convertible arb guys, on the way down, they've actually been covering stock. And so the fact that we are— we have a much bigger net short position out there means that outright short sellers or hedgers, they have shorted even more than what the numbers would indicate, right? So by my calculations, I think outright shorts and hedgers have probably added about 23 to 24 million shares short since the top of $130. And so if you translated that into, let's just assume like an average price of $100, that's about $2.3 billion of short hedge, right? And so that actually, that number, when I think about it, does fit with SpaceX. Like if you've got a number of sophisticated SpaceX holders, insiders, they would probably go out and hedge stock in comps. And this happens all the time. When I used to work in tech banking, And you would, you know, you had companies that were going public and executives who would all overnight become millionaires or billionaires. You would get them in touch with, you know, your high net worth group at the investment bank. And then one of the first products they would pitch is a product to hedge their position, which is not taking a short position in the underlying stock, of course, but shorting a basket of other comparable names, right? And so that's one way that the executive can create some level of liquidity while they wait for the lockup to expire. And then also if there's some downturn in the market, it hedges them from that exposure. And you would do that in a basket form where you would try to have a somewhat diversified group of names, right? Because you don't want to take idiosyncratic risk and just short one name and have it blow up in your face. However, what we're seeing here is kind of that to a degree, which is ASD has kind of taken the brunt of the hedging. Although today it looks like maybe that hedging's expanding quite a bit because I've seen, for example, Rocket Lab down 9% and some of these other names that are down more. But I think it's important to understand these dynamics because as any investor, you know, when stocks are up or stocks are down, people want to know, well, why is it up or why is it down? And you've seen a one-way elevator ride down in all these space names. And in particular for AST SpaceMobile, it's been pretty rough. But, you know, I think it's important to point this dynamic out because there certainly are folks who are using AST as a hedge against their position in SpaceX. And there is light at the end of the tunnel where you have coming up in, you know, mid-August, you know, I think it's August 20th, some of this trade is going to start unwinding and it's going to start unwinding ahead of that date, right? Because people in anticipation of wanting to unwind the trade before other people, you have to start early. And so yeah, that's been kind of the dynamic in the space industry. I think unfortunately this is kind of the dynamic for now and whether it's news or different events, catalysts, they're kind of, they're going to be somewhat watered down because the sector is trading on this dynamic of this massive amount of short interest. And then of course there's like sentiment and perhaps SpaceX is getting more attention. I mean, there's a host of reasons, but there is this one technical aspect which I think explains quite a bit of the underperformance. And ultimately when that does unwind, it will serve as a catalyst to move stocks higher. So let's see. So yeah, that's— oh, and then I guess moving on to the next point, I did, you know, I was thinking through this and I was maybe, maybe, I don't know, maybe the guys on Wall Street already know this and there's some art to it, but just thinking through what SpaceX Classic is and what new SpaceX is, you know, there is a very material difference. And this is why I think this, there's this potential risk for basis. You know, what we call basis risk is when you're short something, you know, where you're long something, you're short something else to hedge that. But then instead of the relationship working out the way that you think it will, like, you know, you're long, when it goes down, the short goes down, or long goes up and your short goes up. Basis risk is a term that we use when you actually have a situation where that that relationship doesn't exist anymore and your short goes up and your long goes down and you get completely demolished. And there's various risks that can result in a basis trade going wrong. But here I think, and again, I'm not sure if these SpaceX holders are smart to this and probably some of them are, but part of the issue with this trade too is that SpaceX has become a very different animal in the last, literally it's been a few weeks, right? And so originally SpaceX was this $18.7 billion space company, you know, 69% launch, or sorry, 69% connectivity, 19% launch, and, you know, the remainder XAI. But in the most recent months, and this is how SpaceX has been able to pitch the street that, oh my God, this company is going to put up astronomical top-line growth. I'm not really sure what the ultimate economics are of these deals, you know, how much of the dollars will drop to the bottom line. But for those that remember, SpaceX right before going public signed these compute leasing deals, right? And so SpaceX built out all this compute infrastructure, which presumably was for xAI, but then perhaps because xAI was unable to use it, or it's not economic, or maybe xAI, they're deemphasizing that part of the business and going forward with the cursory deal. But the numbers are pretty staggering here. So Anthropic entered into a— and these are short-term deals, like they can be terminated, I think, within 90 days. But Anthropic is paying SpaceX $1.25 billion a month. Google is paying SpaceX $920 million a month, and then Reflection AI is paying these guys $150 million a month. And so that's around $2.3 billion of revenue a month. And so if you annualize that, that's approximately $28 billion in revenue. And so compare that to SpaceX's 2025 revenue, which was primarily space systems, and then of course XAI, which was, you know, call it, let's just say rounded off to $19 billion. So going forward, New SpaceX is what we'll call it, is going, or SpaceX, AI, maybe you should slap that on too. Over 60% of SpaceX's forward revenues are going to be related to leasing out compute resources, right? And so the folks who are short space to hedge their SpaceX, what they should be doing if they have good financial advisors is that they should be going out and replacing, if they were 100% short space, names, you know, they could go out and instead replace 60% of that basket with, I don't know, some of these other companies like IREN, NBIS, Mara, CoreWeave, any of these other companies that are in the compute space. And maybe, by the way, that could be happening, but if you look at the way that those names have traded relative to space, it would suggest that that hasn't really occurred, or maybe it's been more gradual. But I would argue that anybody who's long SpaceX, they should probably be shorting 60% of their basket in some of these next-gen compute names, and then 40% would be in space names. And then, you know, you can put your obligatory AEC SpaceMobile in there, Rocket Lab, Firefly, you name it, right? But yeah, I think, you know, one thing that I have not seen the press articulate is the fact that the company has moved away from being a space company and they've become more of a compute leasing company. And, you know, maybe in the future, and this fits with the narrative, of course, is that, you know, they're doing that here on Earth and then Elon wants to, you know, do data centers in space. And so it still fits the narrative, but, you know, a significant part of the financial exposure today is terrestrial data centers, right? And just leasing that. And so I don't know what the margins are on that business, But yeah, I assume that Gemini and Anthropic and Reflection AI, because these are short-term deals, maybe they're paying a little more, or I don't, I mean, maybe SpaceX in order to entice them gave them very favorable economics. But yeah, the SpaceX in the way that the market thinks about it, it's not really as much of a space company. It's more of a terrestrial data center company as of now. But of course, you know, that, that will change in the future as, um, some of this orbital compute capacity goes to space and, and, or maybe SpaceX, um, does take back some of that, those computing resources for xAI if xAI becomes more successful. But, um, but yeah, anyway, but yeah, those, those are some, some thoughts about, um, what SpaceX, you know, insiders are doing around hedging. Clearly there's significant hedging. As I said before, I think there's been an additional 24 million shares short of AST, net of convertible bond guys covering, but 24 million shares short. So again, using an average price of, call it $100, that's like $2.4 billion short to hedge SpaceX. So yeah, that's out there. And I think an important thing for me as a as a holder of AST SpaceMobile is that, you know, understanding those dynamics and that the, that short position, uh, is pretty outsized and, and may not be there, uh, or shouldn't be there into perpetuity, um, because those folks eventually will ultimately sell SpaceX stock. And unless they have a, you know, a fundamental point of view on space stocks, uh, which maybe they, they keep that position, but more likely than not, they'll just cover that position when they sell SpaceX. So yeah, this is kind of a temporary thing, which is why I feel pretty good. I mean, famous last words, but I feel like we've kind of hit the bottom where if you look at Rocket Lab and AST Spacehole and any number of space names, pretty much have given up the entire May run. And so we're back to square one, right? And so I think like this is a pretty decent level in terms of bottoming and, you know, how long we'll stay here or could we drop even more? Yeah, that's certainly possible, but But yeah, I mean, if you're like the meme says, like if you missed out at 100 or 130, if you liked it there, you're going to love it here at 69. So, but anyway, one other thing I wanted to touch on briefly is this Japanese regulatory approval for 700 megahertz spectrum to be used in Japan for satellite services. And so this is a big piece of news this morning. It's part of what I think are related events around the Japanese JLEO project. And so, you know, the equivalent of the FCC in Japan approved 700 MHz spectrum in very specific bands, which are solely owned by Rakuten, who is the partner with AST SpaceMobile. For those that don't know, AST's satellites, the current generation with the Block 1 and Block 2, work with low-band cellular spectrum, which is anywhere between 600 to 900 MHz. And that particular sliver of spectrum was approved for satellite use, which is a big deal because back in the day, regulators did not want terrestrial cellular spectrum to be used by satellites because of concerns around interference, which of course AST's large phased arrays with the underlying technology is able to not interfere with nearby terrestrial networks and light up spectrum. In dead areas, but also during— and this is a key aspect of it— during disasters or emergencies when the terrestrial network is down, AST SpaceMobile's satellites can light up that spectrum and provide service to all mobile users. And so this approval yesterday was a very key, critical step in launching commercial service in Japan. Obviously, Rakuten and AST still need to have their licenses approved to roll out terrestrial service. However, It is important, and I covered this in yesterday's Space, that the joint venture that was formed yesterday, it was announced by AST and Rakuten, that along with today's approval of the 700 MHz spectrum for satellite use, I think it positions, and these are the tea leaves, it positions the entity, which we'll call Satco Japan, it positions them very well for this JLEO contract. And What this JLEO contract is, is a commitment by the Japanese government to allocate, and this is going to be a public-private partnership, but allocate over a billion dollars of capital to procure satellites and then basically run what will be the FirstNet, the equivalent of FirstNet in Japan, which for those that don't know, Japan is unfortunately subject to a lot of natural disasters, whether it's tsunamis, earthquakes, any number of things. And of course, for national security, if you get into some type of conflict with, heaven forbid, China or North Korea, and you had a terrestrial network taken down by whether it's jamming or, you know, you have hackers, having a backup satellite system that can connect to existing mobile phones is going to be absolutely critical. And so that project is the first step of creating what is the equivalent of here in the US after 9/11, we created FirstNet. And in Japan, J-LEO is going to be effectively FirstNet for Japan. And so I think there's a very, very high likelihood that AST wins. There's a whole host of reasons architecturally why that makes sense. And I think one of the most, just boiling it down to the most simple fact is that AST, Space Mobile Service, works with existing cell phones that are already out there. And so if you're looking for national emergency disaster recovery, it's better that the system works with existing cell phones so that there's no need to buy new phones to modify updated chips. Imagine how many older folks there are in Japan. It's great that their cell phones already work with AST SpaceMobile versus having to upgrade with Starlink. And of course, you're using low-band spectrum. And so I covered this yesterday, but Heaven forbid if there's an earthquake in Japan and a skyscraper gets pancaked and you're trapped under the equivalent of 3 to 4 levels of floors of rubble, the ability of satellite to connect your phone is much, much higher with low-band spectrum. With mid-band spectrum, you're not going to get through one wall. And so to me, all the signs point to AST and Rakuten getting this contract. And today's, you know, yesterday's formation of the JV, today's announcement of the MIC or the equivalent of FCC approval for 700 megahertz to be used for satellite services. That to me, or, you know, it's the tea leaves kind of telling you where this thing is going. Now, there is an internal decision, I think, at the end of June for this. This project, and then I believe we'll learn who the bidder, which bidder won, probably sometime in July or August. However, my guess is just given you know we've got a number of great reporters who work with Nikkei and other news agencies. I'm sure it'll perhaps get leaked, and we'll find out who actually won that. Maybe if Abel, if he during launch, if he struts out at these these. he's looking really confident, maybe that would be a tell. But anyway, but yeah, that's pretty big news. And so having that approved in Japan, and then of course in Brazil, we recently had approval for utilizing commercial service there. And on top of that, we were given 10 MHz by 10 MHz of S-band spectrum, which is huge, right? We didn't have to pay for it. Brazil just gave it to us. My guess is Similar to what we saw in Europe, where we have Satellite Connect in Europe, and in the U.S. it hasn't been named yet, but perhaps there could be Satellite Connect USA or America. And then of course now we have Satellite Connect in Japan. That hasn't been named yet either, but I think that would be a good name. The other thing oh the other thing I forgot about satellite the JV in Japan is that Katya had found that we. And Rakuten had been testing our service on SoftBank's spectrum. And so, you know, typically as you kind of piece together some of these nuggets, it kind of points to where things are going. And so the fact that you have this satellite JV formed, it's going to make it much easier for players like SoftBank or NTT Docomo to join that consortium versus, you know, the existing, right now, uh, KDDI, NTT Docomo, and SoftBank, they all use Starlink. Um, and I've seen some of the reviews and they've been pretty awful from Japanese users. And on top of that, of course, um, I think all these MNOs are coming to the realization post SpaceX IPO that SpaceX is coming to eat their lunch. And so, um, I would expect some of these Japanese carriers to defect and join. Uh, that is, of course, if Rakuten allows them to join, which, which I think they will. just given that this JLEO project, by the way, if there is an emergency and the terrestrial network goes down, you by law have to allow these carriers to, the users to utilize your network. And so that would just make it technologically a very easy thing to do where it's like, okay, we've got to integrate with the JV. You know what, can we just join and we'll pay you for it? Which I think is ultimately what's going to happen. So right now AST's working with Rakuten. The reason why no one else worked with AST is because of the exclusive mutual agreement, mutual exclusivity with Rakuten. But I think Rakuten will probably look to kind of have Satco Japan as its centerpiece in terms of building their mobile business and differentiating themselves, but then also extracting rents from some of these other players who ultimately will leave Starlink, right? And so I think you're going to see something similar form. In Japan, where perhaps three out of the four will start working with AST Space Mobile, maybe even KDEI drops Starlink eventually. But then something similar is likely going to happen in Brazil, right? So we have approval for operations in Brazil for Space Mob. Folks know that we've been hiring employees down in Brazil, and so it looks like the setup is going to the same similar, you know, the same. of setup is going to happen where there's probably going to be some type of joint venture formed in Brazil around 1 or 2 key MNOs, and then those guys are going to ask other MNOs to join. And the cool thing about that MNO is that you've got the 10 by 10 MSS spectrum, S-band spectrum already in, you know, AST already has the approval to use that. And then the MNOs can contribute some low-band spectrum to make the service even more robust. And so yeah, it's a pretty exciting time. I mean, putting aside the fact that the stock price has gone down and you've got people crying bloody murder on X, which is probably a good sign that we are close to bottoming. But yeah, I think it's important to stay focused because there's been a number of positive developments with the company. And of course we have launch coming up in early August. We probably are going to get some shipment news soon and some additional color around defense awards. And then, of course, the the potential for additional SpaceX launches to be announced and and new MLAs with ULA, Relativity, MHI. Oh, the other thing I forgot, and I know some people posted about this, and I did cover it, I guess, yesterday in the in the space. But as part of this J Leo project, one of the key aspects is if the folks who are bidding on the project are supporting Japanese industry, and obviously we can do a lot there because. Isabelle alluded to in the 3rd quarter of last year, they have been talking to Mitsubishi Heavy, who, you know, they have the H3 rocket program, which in its heaviest configuration can take probably 3 Bluebirds to low Earth orbit. And so by having the $1 billion from the Japanese government, I believe you could pretty much pay for a pretty, you know, a decent chunk of launches. And so getting paid to launch on a Japanese vehicle would be great, right? And so I think that's another big advantage that AST has versus Starlink, which for all intents and purposes, I, it would be a bit odd for Starlink to launch satellites on Mitsubishi Heavy Rocket. But, you know, I guess never say never. But anyway, yeah, that's kind of all I had for today. Let me just see if there's any questions. But yeah, I think it's important to keep in mind, just stay focused. A decent chunk of this move I think is from hedging activity. And by the way, like a decent chunk of the move up was euphoria related to the SpaceX IPO. And so we're now in the hangover stage and the malaise. But yeah, obviously as long as macro conditions are okay, I do think we'll see a rebound from here. Let me see. So one thing, I've been buying so much today, sub-70 shares and spreads. I have limit orders set. I feel like this is a major gift. I agree with you. Take the gift, friends. Let's see. So wait till August until AST price reaches 30. Okay. Yeah, I guess. I mean, anything's possible. A stock price can go to zero or it can go to 300. But I think the dynamic of folks that are hedging using space stocks, my guess is that you're going to start seeing an unwind of that trade probably in the second half of July and definitely early August. And so if that's the timing, then maybe people will start moving even in advance of that. But yeah, from a trading perspective, you've seen pretty much all the SpaceX euphoria come out of the space stocks. And so if you're looking to establish a new position or add, I think these are good levels. But for this person who clearly is probably desensitized or upset, $30 is certainly possible. Sure. I mean, anything's possible. SpaceX could trade to zero. Let's see. Did you find any info regarding recurring revenue of JLEO post the $500 million? I do not, but I guess this is kind of an interesting example there. For those that have followed Starlink, Starlink had pitched to the Department of War a service, which I don't understand how it could work, by the way, because their phones, I mean, their satellites cannot interact with existing phones, but they were pitching to the Department of War. A direct-to-cell service that could be provided to Iranian citizens, and they were going to charge $100 million, a $500 million upfront fee to set that up and $100 million on an ongoing basis per month. Right. And that's to provide some type of direct-to-cell connectivity to Iranian citizens, which is pretty crazy if you think about the economics. I mean, Clearly, I understand providing unencumbered, unfettered internet access to Iranians or North Koreans or whoever you pick, the people that are under an oppressive regime, there's a ton of value in that, right? But in order to do that, you probably need a satellite system that works with existing phones. I can't keep emphasizing that enough. Using Starlink satellites that focus on mid-band spectrum that are in areas that most of these phones don't support, that's going to be hard. Let's see. Now that the cat is out of the bag, do we expect a formal announcement from Rakuten AST on the JV? Any insights on whether BB11 through 13 are complete and mid-August the soonest that it could launch? Okay. So a formal announcement on the JV, I don't expect one unless we win this JLEO project, Or, or we get closer to commercial service. So I think in the regulator is supposed to revisit the today's approval of 700 megahertz. There was like some type of, I guess, meeting that's going to happen in September. And so maybe that's when you get the formal approval for commercial service. And so perhaps the JV. And a JV announcement comes before then, or, you know, maybe Rakuten and AST are still working on the JV and hammering terms out. Who knows? But I would think that if we get this JLEO project, and that decision's supposed to be at the end of this month, however, it's an internal decision which will be publicly announced in the subsequent weeks or months. If we get that, then my guess is that there'll be some type of massive commercial fanfare event saying, hey, ASD Rakuten have created Satco Japan, and we are going to provide this truly innovative service, which is going to transform the ability of Japanese citizens to connect to anywhere they are, but also during emergencies, you know, you're creating FirstNet of Japan. I mean, it'll be I can imagine like all the the PR around that, which is going to be pretty huge. So so yeah, I would think that they're going to wait for something more formal before they announce that. Let's see any insights on 11 through 13 being complete? Yeah, Bluebird 11 through 13 are pretty close to being done, right? And so the SpaceX launch—I know some people had expressed some the I guess disappointment that the launch is going to be in the first half of. August, but based off some of our due diligence, I think that was always going to be the case, like the first week of August. And so I know there were people who were speculating that it could potentially happen in July, and you know, that was wishful thinking, but that's what we have booked. And so I would emphasize though that the company is working on getting additional launch. And so, you know, from what I understand, that handful of SpaceX or equivalent launches, I think we've got Including this one that's coming up, we've got 4. That's my estimation. We have 4 SpaceX launches for the rest of the year. And so the company is probably trying to procure additional SpaceX launches. And on top of that, MLAs for some of these other launch providers. I forgot to mention Ariane as well. And so that's probably why we haven't gotten an update on the 45 by year end, which by the way, like that's not going to happen for anyone who Thinks that that's possible. It's not going to happen, right? So I think the company is going to update that at the appropriate time when they have a better handle on how many launches they will get in this year. That said, you know, 45, if it's not going to happen in the end of this year, if it happens in March of next year or April next year, that shift backwards is not that big of a deal. And then on top of that, when Blue Origin gets its act together and the launch pad is up and running, Hopefully by sometime in December, what will happen is they will have a bunch of GS-1, the boosters, the reusable boosters, and GS-2, the second stage, is completed at that time. So once they demonstrate, call it 2 to 3 successful commercial missions, then AST will start leveraging Blue Origin again. And so getting to that 45 number, In the first quarter next year, it would actually be pretty, look pretty good. Let's see. When is the T-Mobile Starlink deal ending? That is ending this month or next month. So, but I don't expect them to like completely abandon that. But you could see the, you could see AST announce something with T-Mobile perhaps a few months from now. I don't think it would be near term. Or T-Mobile and AST could say they're evaluating working together, but you need the MNO JV here to get through regulatory approvals. And by the way, like that has not gone definitive yet. Do I expect positive news about the JV working with AST? Yes, eventually I do. And, you know, speaking to the company, they would tell you that, you know, they're working You know, with AT&T and Verizon, they have contracts for a number of years. And then what this JV does is it's opened up T-Mobile to work with AST. Let's see.
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[00:44:52] Speaker B: Your team just added its 67th AI tool and also your 67th security blind spot. The good news? The Vanta agent works like a GRC engineer in the background, Finding every app your team uses, scoring the risk, and drafting fixes for you. Vanta is the platform used by over 16,000 fast-moving companies like Ramp, Cursor, and Harvey, who are shaping the future with AI and staying ahead of AI risk. Get started at vanta.com. Let's see. This is a fair comment. So knowing that this is common proxy hedge, to what degree should folks have known that this was going to happen? We faced month as SpaceX is going to lift the floor only to suck it across the space. Suck it out. Yeah, so this was a— the euphoria, the ramp going into the SpaceX IPO certainly happened, right? Which is stocks for AST hit what, $133? And Rocket Lab hit maybe it was $150 or so. And so the question was always how much of that was, you know, what was the peak going to be and what was the drawdown going to be from there, right? The post-IPO malaise and then perhaps some level of hedging. And so I think this has actually been much— the impact has been much bigger than I had expected. But then on top of that, I think the thing that really put a dent in the space sector was the fact that Blue Origin had this blowup on the pad, which, you know, I take— I try to console myself a bit because that was not something that could have been foreseen for me. In particular, I remember that morning, that evening, it's like, oh, you know, Blue Origin, New Glenn 4, they're going to do a static fire, which for all intents and purposes is somewhat of a routine event. But of course it wasn't routine and you had an explosion and destruction of the pad, which caused AST to tumble and then it took the entire space sector with it. So it's kind of hard to know, like without that happening, would AST be trading today more like 90, um, or 85 or 100, or who knows. Um, but it's unclear. But that's the tough thing about investing in markets. You don't really know. Uh, if you knew what the impacts were going to be, then, then you'd be wealthy beyond imagination. But, um, we have to do our best and figure out our, our best understanding or estimation of, of how stocks will trade and, and what events will impact them, what won't. And so yeah, it's, it's tough. Let's see, someone's saying, is not most of the monthly revenue from SpaceX coming from the new compute deals? Um, yes, which is what I wrote, uh, in my tweet. When can we expect better cadence than 3 sats launched every 2 months? Um, well, if we've got 4 SpaceX launches scheduled for this year and one's happening in August, then you have to have 3 more over the next 4 months remaining in the year, which, so it's going to be approximately one every 1.25 months depending on how many are produced. And my guess is that we are going to get to a production level where launch is going to be constrained, and which is why there could be announcements of getting additional SpaceX launches, which the company is not. I think my guess is that we could hear about maybe additional launches, or maybe it's not going to be as explicit and the company will just say, okay, here's another launch in September. And then we've got 2 in October and 2 in November or 1 in November, 1, 2 in December. But it could unfold like that where we will As time goes by, we'll find out, oh, we actually have more launches than I had predicted. Or let's see, what are my thoughts on the spectrum auction yesterday? Well, so the AW3, the remaining spectrum licenses were auctioned. It looks like they all got sold. I think there was one primary bidder for most of them. And so my guess is that it, you know, in a rational market, it probably was AT&T because they don't have as much exposure in mid-band. But the, the, the big, uh, tail event would be if, if SpaceX bought all those licenses, which if they did, then that, that would underscore, of course, the MNOs', um, need to work with AST to counter SpaceX because clearly they want to get into the terrestrial business. Let's see. Someone's asked, have you closed your ASTX position? No, I have not. I have not closed it. It's been painful. For those that don't know, like I do trade the levered ETF from time to time. On the first run-up or on the run-up to 133, I actually had a pretty decent position I'd built up in the 60s when the stock was in the 60s and the levered product was at I guess it was like at $23, $24. And then I sold all of it going into that run. And then post the Blue Origin New Glenn explosion, you know, I've been like adding to it periodically on the way down. And it's been painful because as I've mentioned before, when you have these leveraged products and you have a unidirectional movement down, it compounds the losses. And so you've seen You know, the previous time that AST was in the mid-60s, I think ASTX was at 25, whereas now, now that we're at what, 68, ASTX is now at 17. And so you've seen the power of compounding and of course the error tracking of this product where it has significantly underperformed after overperforming to the upside. Now it's underperformed on the downside. But I have not closed my position. So it's— and by the way, it's not a massive position. It's small relative to my AST position, but nonetheless, it has not been fun. So, and another quick reminder, do not trade on margin, invest on margin. If you use— if you want leverage, then from time to time utilizing like these ETFs can be okay, or options, but As I always say with options, whenever you trade them, I mentally just write them off. So if I ever buy, and by the way, I have no option positions right now in AST, but if I ever trade options, I enter them thinking that I should just immediately mentally write them off to zero and just be prepared for that. Where I do think some folks who are very vocal on X, like, you know, it's probably clear that they are Leverage to options and are upset with the performance. So as Kukas mentioned, options are a financial drug and just be careful using them and also be careful using margins, margin, because you, if you use it tactically from time to time, it can be okay. But if you are always on margin, at some point you're going to get carried out. So anyway, I'll end it there. Thanks everyone for joining and we'll catch up again soon. Hopefully that was helpful. And yeah, I think right now, as I said, I guess in closing, we're all kind of at the whims of the market and whether there's good news or bad news, well, hopefully just good news, you know, that's not really impacting stocks. The entire sector is just trading together, but eventually that's going to change. And so you just gotta hold tight and be able to ride it out until we have that change. But Anyway, uh, thanks everyone for joining and we'll talk again soon. Take care. 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 Thanks again, and I'll see you next time.
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