Anpanman - Why the SpaceX-xAI Merger Changes Everything

[00:00:06] Speaker A: This is the AST SpaceMobile Podcast.
[00:00:09] Speaker B: It will just basically come to your phone and be seamless regardless of where you are. We don't want the user even to know that it's connected by satellite. Listen, the opportunity that we have is very, very, very large.
[00:00:25] Speaker C: Hey everyone.
[00:00:30] Speaker A: Thanks for joining. Um, sorry for yesterday. I was notably absent for part of the day because I was busy doing some family stuff. And then in the evening, uh, I was thrown a curveball. Our basement flooded because we have neighbors who are Somewhat negligent and I guess incapable. And they, they had like a pipe burst and, and in New York City, that's a bad thing. And so I had to deal with that until 2:00 AM. But, but it required me to be heavily involved and help, you know, I ended up helping a few other neighbors as well. So I'm now coming outta that whole mess and quite tired. But I did want to talk about AST SpaceMobile. 'Cause even in the depths of that crisis, I was still thinking about the SpaceX-XAI merger. And so yeah, I wanted to share a few thoughts this morning, which, you know, on the looking at the stock price reactions yesterday, I think the market just totally doesn't get it. And so unlike those who have followed the sector closely, this announcement is incredibly bullish. And the only negative I could see potentially is that the IPO that Elon is targeting for June, like maybe that slips a little bit, but I think people may, perhaps they don't understand mergers quite well. I mean, typically when you have a public company, you know, public to public merger, you're probably looking at a, you know, at the short end, if it's a tender process, a 45-day type of transaction if the regulatory review is very quick. But typically you're looking at like, well, my cat's jumping up on me, but typically you're looking at a pretty long process, probably 4 to 8 months. But here in a private transaction where you have a buyer and a seller that know each other, obviously it's Elon and shareholders know each other. It's not very complicated. They can close the deal pretty much in a few weeks and there's not going to be any HSR, which is antitrust issues, because obviously the companies don't compete and they don't really overlap. And so the deal will close very quickly and the bankers that they selected, I'm sure they've already started drafting an S-1 for the IPO and they will of course have to work especially hard because they're going to have to incorporate xAI business overview risks, things like that, you know, the pro forma financials. That'll be interesting to see. But yeah, for all intents and purposes, I think they can still pull off, if they work their asses off, they can, and the SEC is amenable and cooperative, they can probably still pull off a June, perhaps July IPO. So I think the stock's In the space sector sold off potentially on an idea that an IPO would take, would get delayed by 1, 2, 3, 4, or 5 months. But in reality, because this is a private-to-private transaction with basically the buyer and seller, the same person and parties, the deal is going to close very quickly. Like, I wouldn't be surprised if we see the transaction close In a handful of weeks here at most. And so during the pendency of that deal, the bankers and attorneys are going to draft the S-1 in parallel. So that's not going to slow anything down. And why this is bullish, I think Redrum, thankfully we have such a wealth of knowledge with Space Mob. I think, well, Redrum summarized it quite well this morning. Where he did this post on discussing how SpaceX and xAI are working together. And so that leaves OpenAI, Google, Anthropic, who are the key AI players, but then also there's other folks to consider like Microsoft, Amazon, Apple, who's obviously pretty far behind, you know, and then you've got international companies as well. You know, Samsung, other big tech giants that are doing their own thing. But this basically lights a fire under everyone's ass, right? So if you were Google or OpenAI or Anthropic and you weren't really thinking about space, yesterday completely flipped that on its head, right? And so we know Google has been thinking about space because they're doing some initial work with Planet Labs. Obviously, they've got an investment with Planet Labs, also with AST SpaceMobile and a strategic partnership as well. But for all these companies, if space was kind of a novelty, it's now front and center because now if you project out into 5 years, 10 years, the ability to have data centers in space becomes a huge competitive advantage for Elon Musk, and he's vertically integrated. And so for these companies that thrive on compute power and trying to do that efficiently and in a cost-effective way, they've all got to figure this out. Like, it's probably something that they were thinking about in the background, but now it's front and center because now that's where the puck is going. And so with all these companies, they've got to figure out, Who are they going to partner with? Who's doing stuff? Who's capable? And that's where companies like AST SpaceMobile, which is focused on direct-to-device and other military applications, but has the ability, already has building blocks to build data centers in space, becomes a natural partner. And partner meaning someone that can help you develop that technology, Also, maybe they become strategic. You make an investment, you do joint ventures. I mean, there's a whole host of things, but then I guess on the outside, the potential is that maybe it becomes important enough where one of these companies decides to acquire AST SpaceMobile, which I don't think is a high probability. I think the company has way more value as an independent player that's applying wholesale data services and obviously other services as well on their own. But then if you could, if there were a few, there could be a few entities out there that would make sense that would still keep that neutrality. Google would be one, for example. But yeah, I mean, I think this rush to space is going to put a lot of pressure on anyone who's competing with any part of Elon Musk's vertically integrated empire, right? And so you can just assume that Tesla slots right in there too. And so any companies that are looking to compete, they'll have to find a partner in space that has expertise and capability, right? And so these companies, AST, Rocket Lab, Voyager, you know, Redwire, Intuitive Machines, Carmen, any number of them, they all become very strategically important because they have the expertise and know-how to deliver systems in space. And, you know, each of these players have different aspects. Obviously Rocket Lab has, you know, small launch right now. They're looking to get into medium launch and they build space systems. And so there's a lot of expertise there that somebody would be interested in working with, right? And so that's where, for example, the stories of OpenAI, I think it was last summer where they had looked at potentially investing in Rocket Lab or potentially merging something like that. That's where a lot of this stuff over the next few months, these, there's probably going to be real concrete moves to Build some alternatives to what SpaceX is doing, right? And so, I mean, that being said, these companies are going to be, they are going to work together. I mean, it's like coopetition. You cooperate, but you also compete. SpaceX obviously has Falcon 9 and they'll be sending payloads up in space and they launch competitors' stuff. And that's not going to change. And if anything, you know, I caught up very briefly with Cook last night after I was done with my ordeal. If anything, this puts a tremendous amount of pressure on SpaceX to make money because XAI does not make money. And they, it's almost like it's a big furnace, right? You gotta keep throwing money at the problem to get better. And so for SpaceX, this idea of not optimizing commercial launch or just doing your own stuff, versus taking on commercial dollars outside, that's going to go away. Not that that was ever an issue, but if people had this idea that maybe SpaceX is just focused on launching their own satellites, they actually need to make external money because xAI is going to need a lot of money and investment on an ongoing basis. Also, the beast to feed, which is going to be this pursuit of data centers in space, that's going to require a lot of money too. And so running the core business, which is Starlink, and obviously Starlink on its own is a big cash cow, generates a ton of revenue and free cash flow, that's okay. But then on the launch side, they're going to have to really be aggressive in bringing on additional commercial customers. And funny enough, like the fact that they are making this push into data centers in space, That is going to create a tremendous amount of demand for launch, right? Even though you've got a ton of launch capacity coming online in 2027, all of a sudden now we've got a new end market that's going to drive demand for that launch. And so for all the launch providers, that's a good thing, right? Because now you've got demand for what's going to be tons and tons of cargoes that need to go out into space. And so for SpaceX, it's a win-win. And for companies like AST SpaceMobile, as I mentioned before, there's, you've got all these players now that will be scrambling to find a partner. And it's not, and I think maybe perhaps the market will look at some of these space players and think, well, you know, this company's like focused on communications and some military applications. But in reality, you've got to look beyond that, right? Like, if a company like Rocket Lab has some pretty interesting technology around solar hardened gallium arsenide solar arrays, like that's going to be in demand. And, you know, thinking more broadly, For, I don't want to like keep pushing or call the top on memory guys, but memory and storage, all those companies that were, you know, SanDisk, Micron, Western Digital that are supplying terrestrial data centers, like there's some limitation to the demand of that stuff, right? But then if you think about space, and this is where it gets like kind of kooky where people say, well, you know, Space is unlimited. The potential is unlimited. That's kind of true actually, because once you start putting data centers up in space, like just imagine the demand for memory chips, processors, hard drives, those things aren't going to be made in space. They're actually going to be made down here, but there's going to be a huge push to build out capacity for for a lot of this hardware that eventually is going to go out in space. And so if you had any limitations of things down here on Earth, then just imagine sending tons and tons of hardware up into space. And so I think all those companies are going to benefit, solar companies are going to benefit, a whole host. And right now, I think obviously the market is digesting this news and people are kind of figuring out what does this mean? What are the implications? Are there ways to play this? And as I mentioned before, I think yesterday a number of the space companies like sold off because of the idea that perhaps the IPO for SpaceX is going to be delayed, but I don't think that's the case. And I think as people digest this more and understand the implications, there's There's a very small group of companies, private or public, that can do this stuff. And so there's going to be this huge demand to partner, to invest, to do business with those companies. And yeah, I mean, literally this is like the phrase actually is true. The sky's the limit. Like it's actually the limit is not the sky, it's space. And And space is big, right? And so I think once people digest this and maybe sell-side analysts, I don't know if they'll eventually get there, maybe in a few weeks or so, they'll be like, oh, you know, this news is important because now there's this new data center race to space, right? And there's only a few companies that have expertise that can do this stuff and that can get us there. And that's where you want to invest. And so actually I've got to hop because there's a service provider that's come to help pump my basement. I know that sounds funny, but I need a dry basement. So I'm going to hopefully reconnect with everyone later. But yeah, just take a step back and think about what this means and the fact that you're holding some of these space companies that are like, they're precious gems, right? And they're needed to make this this push to space of reality. And Elon, he has all his stuff kind of lined up and ready to go, but everyone else is like, what do I do? Who do I work with? Like, who understands this stuff? Yeah, those are the companies we own. So, and it's not just the tech players, but it's also all those data center guys here on Earth. They got to figure their shit out immediately because Yeah, things look good for the next few years, but they're going to need a space strategy and some of their expertise down on here is going to translate into space. So it makes sense to partner and to invest. So I'll leave it there and yeah, we'll catch up again later. Hopefully I'll have good news about my basement. But anyway, take care.
[00:15:48] Speaker D: Number 4. Too good to be true. Will it work? We don't have a clue. Lily awaits, we will be there soon. Swinging Whoa.
[00:16:47] Speaker C: We love the risks. We love the risks. Bluebirds soar, connect the world. Fortunes rise and seats unfurl. We hold the line through the fear and bliss. Causeway, the mile.
[00:17:41] Speaker D: Hills and seas where no towers stand, connecting voices in forgotten lands. Each day feels like a bluebird's kiss. A journey to Leo Abyss.
[00:17:59] Speaker C: We love the risk. We love the risk, through blood, soul, connect the world. For shoes, rides, and seats on floats. We hold the line through the fear and bliss.
[00:18:18] Speaker D: 'Cause we're the Model Space. We, we love the risk.
[00:18:56] Speaker C: We, we, we love the risk.
[00:19:01] Speaker D: Bluebirds soar, connect the world. Fortunes rise as each unfurls. We hold the line through the fear and bliss. 'Cause we the Mob of Space. We, we love the race.
[00:19:33] Speaker C: Ride the spectrum, chase the beam, never foolish enough. Hold, hold, hold it in that time. We love the risk. Where? We love the risk. 3, 2, 1.
[00:20:00] Speaker D: We love the risk.