Kook' Weekly - April 19 - Off-nominal: New Glenn, Amazon's Move, and the SpaceMobile Ramp

[00:00:00] Speaker A: You don't have to do this to impress me. Sir, the possibility of successfully navigating an asteroid field is approximately 3,720 to 1.
[00:00:07] Speaker B: Never tell me the odds. This is the AST SpaceMobile Podcast.
[00:00:14] Speaker C: We just basically turn 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.
[00:00:31] Speaker A: I'm trying to clean up my schedule while I'm waiting for my departure for the airport. I figured there might be some general interest to talk out loud as a lot of people are freaking out on the internet, quite predictably. But, you know, I have a job to do, which is the Weekly. So never mind that we might have just had a news event of some Minor interest to people. I still feel like it's my obligation to go through all the week's news. But let's start with the elephant in the room. So a lot of us this morning had a truly spectacular opportunity to watch the New Glenn 3 flight, which for feedback, next time I think we want to be at this jetty beach so that we're a little closer to it because I personally like to have that visceral feeling of by. rib cage being shattered by a rocket. And I, I'm kind of a daredevil, so I'd like to get closer. So next time, let's see if we can do it on the beach and get it catered or whatever, but still amazing nonetheless. And so New Glenn got to orbit. How high is the question, and successfully relaunched the booster. Some questions that we have are, what exactly went wrong and what does that mean for future New Glenn flights. So the question is really, is that Stage 2 having any issues? Is it reliable? What does it mean for Blue Origin certification, which is important for everyone? Some questions on if it doesn't count as a certification flight, does that mean actually some free Blue Origin flights open up for any sort of risk-seeking companies that want to Donate some non-concrete cargoes, TBD. But in any respect, if this were a Starship flight, could you imagine the SpaceX valuation pushing to $3 trillion? People would go, they landed the booster, they got to orbit, otherwise perfect. And maybe the satellites got put in the wrong place, but hey, progress is progress. But because we live in a world of double standards, The internet has immediately gotten to be quite negative on what was otherwise truly astonishing, where there's only one country in the world that can do this, and it was just done in front of our eyes. So what we don't know as it relates to the cargo is where it is. And so it says off nominal, but when I was just looking at the tweets, it did not say that there's an anomaly. Which is, which is important. Um, the anomaly would suggest that the rocket had some failure state. And so Blue Origin's not saying that, which is important, because if it were a failure state of the rocket, it could give more evidence to the idea that we did not reach a certain altitude as opposed to Getting high enough, but being in the wrong inclination or something like that. And why that matters is if you're too low, then it just might— it's just too much drag, and it might be, you know, something where you can't unfold it, or if you do, you're going to deorbit too quickly. If you're in the wrong orbit, whether or not altitude is an issue— altitude would remain a question as well. If you're in the wrong orbit, though, the problem is whether you pose a collision risk because, you know, you got popped into the wrong neighborhood and you gotta reassess what the HOA says about you spinning around in their area. So we don't know that yet, but I personally, I know a lot of people are ripping me apart on the internet. I don't care. I'm just going to probably block most of them. But when you think about it as an owner, what did you learn today? You learned Blue Origin is continuing de-risking their rocket, landing a booster. So that booster's still in the recyclable inventory. They got to orbit. We don't know which one. Our satellite was alive once it was deposited into said unknown orbit. And so then you really think about it, what did you not get? Well, we don't really know what the revenue would've been on one particular satellite. But in the context of present value of future growth, truly immaterial. What you did get, but you already had, was proof that the production shakedown for both Blue Origin, but more importantly AST, has continued to de-risk and we're closer to batch. So I get it that there's going to be a lot of people, in particular retail, that start selling when the overnight market opens tonight. and in the morning, I'm sure I'm going to get my face ripped off by people, but I'm not very sure that I'm going to get my face ripped off by the market because I get probably too jaded and I'm too, I don't want to say too comfortable with what I own, but I do know what I own. And so in my time horizon, which is longer than a day, this doesn't really matter to me. I'm obviously disappointed, more just sort of dreading the reaction of others. But as it relates to business continuity or financial risk to the company, it's effectively immaterial, or it is immaterial. And whether you get insurance proceeds or not doesn't matter at all. And so that's what I think. And so what's the market going to do? I also don't know. In a prior life, I would've been Positioning in front of launch sort of with trepidation. This is sort of the risk I don't really want to deal with, with a portfolio manager on, like, I don't know if the rocket will work or not. What I do know is that the tech works and that over a year or two we'll have a lot of satellites up. But on this individual little thing with jump risk, I don't really want to deal with it. And so I would've gone in lighter, and if I were a convert guy, I would've gone in with a heavier delta. So then you see what might be a gap down tomorrow. I'm covering like crazy. And then, you know, the market should see the general trajectory of what's going on both in Blue Origin and this company. And so I don't really see a strong reason why— well, there is no material change as far as I'm concerned. And for all we know, the satellite was put into a high enough orbit where they can just position it where they want with the thrusters. Potentially impacting the total life of the spacecraft, which really doesn't matter whether it's in orbit for 3 years or 7, if that is the result. By then, this will have been antiquated technology anyway. And so, so we'll see. That's the big news. I would think most of the people on this call are not the people that are likely to be overnight dumpers. Because the fact that you're on this call means you've taken quite a considerable effort to know what you own and think things through. But there's a lot of people that don't, and I'm seeing this on Twitter. People already having like full crash outs saying this is catastrophic, like whatever. These are people that are highly unlikely to be successful investors in their life, and that's a shame. So I don't really have much more to say on this point. As I don't know the answer, and I'm certainly putting out my feelers of people who might know the answer to collect more facts as they're allowed to share them. But I think it really just comes down to the company right now is almost certainly aware of how high the satellite is. And then provided that it's high enough, they'll know that in theory they can use it, but they're going to be having to run a whole lot of calculations Presumably coordinations with NORAD to figure out, again, the lay of the land in their new neighborhood. And so just imagine being dropped off all of a sudden in Shanghai versus your intended neighborhood of Atherton. Well, you gotta like figure out where you're going to go for dinner. And all of a sudden you had some unexpected changes. So those are the things they're going to be doing right now based on my best understanding of this, which informs whether or not it's safe for them to proceed further or as an uninvited guest into an unintended orbit, they have to do something else. So that's what I know about this, but otherwise was a pretty incredible event. Very nice of the company to host this and learned a lot from some of the people I interacted with just in terms of the trajectory of the company, their expectations for the future of the technology, which I won't get into right now, but I certainly learned some things that were inspiring that are hitting on things that I've previously talked about in terms of product roadmap and the importance of continuing to innovate. Which I will touch on in a second. So what we also got on Friday was a satellite production update. And this is again why I would say that the failure of any one satellite isn't a big deal if this satellite in fact failed. So if BW3 had failed, the company would've gone bankrupt. If Block 1 had failed, the company would've more likely than not gone bankrupt. If FM1 had failed, it would've been disappointing, but you would've just been looking to FM2, this satellite, to learn what you needed to learn about unfolding. I'll use unfold right now out of respect and deference for Scott's loss today. You would not have yet learned about the unfolding mechanics of the Next-gen satellite, but we did learn that already from FM1. So FM2 was the spare satellite meant to work as a pair with the SDA for sure, but in and of itself, because of the success of FM1, not that important strategically. Because now we look to Batch 1, which we learned more about from the production cadence. And so I have this chart that I posted in Weekly. which shows really my T-account looking at satellites in WIP, work in progress, versus things that you are crediting from that account as they are shipped. And what we don't know is the stages of work in progress within that T-account, but we do know, just because Space Mountain has a lot of information about the status of the composite rings, the movement of those in, the arrival of buses, Which are then informing our view of the 25 satellites that are in production. How many of those are at certain stages, which then gives you an early lead time look on ultimate shipments. And so I still maintain, again, look like an idiot in the short term because everyone really observes the stock on a day-by-day, week-by-week basis. but I'm thinking on a quarterly, semiannual scale or a little slipper dip here and there. Sure, I get bashed on Reddit, which I apparently did a lot this week, but it won't matter. And so we're seeing all the right things, which is ultimately what matters is the net present value of future growth opportunities. And so the stock is not discounting FM2. The stock is discounting FM 243 and the entire path to get there. And so each day I'm asking myself a question of where are we on that path to get there? And a lot of snarky people will say, well, pretty far away since you haven't shipped. Well, whatever, take a report. This is developing and it will develop in our way. And then you have to ask yourself the question of what does our market look like? What does our business look like as we get to the 243? But the company continues to scale. We had the Antonov arrive with more wings. We got pictures of the flight control systems, which are showing all the right movements and scaling. And so company's getting ready for a pretty exciting back half. And you can see the MNOs are really excited. And so Bell was out talking about the continued momentum in the partnership. And admittedly, if this satellite doesn't end up working, then, you know, not all— basically not one step forward, but really not— you were one step back. But the satellite, what we did also learn because of the flight patch was the importance of the military. And so as Katzy found out, They literally put on Morse code MILNET, so military net, which is important and something we knew. But when people kind of scoff at the idea that ASTS has all this military importance, the fact that they literally are writing MILNET on their flight patch is certainly a giveaway. And it just goes to show you the importance of this company and the future Outlook. What I found interesting this week— I'm sorry if I'm a little short of breath. I'm trying to double task. I'm on the treadmill right now. So just is what it is. Doing 2 things at once, light cardio while broadcasting our complex satellite developments, which I'm not qualified to do. But we had an interesting article written by A, of all people, a paid consultant who has a zone axe. But what's interesting is just, again, a pretty clear delineation of the different tech differences. And so it points out that among the field, which at first glance might look crowded, you have names like Iridium, Skyla, which honestly, as I look at it, looks like satellite idiot, which they probably are. And Qutech, Starlink, now Amazon, all of a sudden it looks like a crowded field. But when you start to dig down, you have many of these people are just narrowband IoT satellite operators. They're using general roaming, which is a separate network, not integrated to the MNO, which is not offering consistent network slicing. Very, very different. And then you have Starlink, which is basically Trojan horsing itself to be a parallel network using the MNOs to get access to their end users. Very, very dangerous for the MNOs. And then you have Amazon, which hasn't yet really defined its strategy, but what I'm learning is that they're really probably not going to really compete in this market. We'll get to that in a second. But as Katsy points out in the next post, The first principles basis of ASTS is ultimately why it's going to win, is because it is directly integrated into the MNOs, which allows them to work seamlessly, which then allowed the MSOs— sorry, not MSOs, MNOs. MSOs would be a different call where you were starting to talk about cannabis, which maybe is appropriate today. But average all of you not to go down that route. But with the MNOs, we have that problem. They don't want all these terrestrial towers. And so if they can displace loads to the sky, they're going to want to do that. And we have Catseye very astutely picking up the fact that ASTS announced that BW or BB7 FM2. will greatly exceed 120 megabits of peak data speeds. Well, what we all learned today at 4 in the morning from a bell is that the speeds will be above 150 megabits per second. So that's pretty telling in terms of what they're achieving in terms of spectral efficiency. And that again causes this convergence, which I've always believed as to why satellites are going to start to replace the towers on the margin, and that is a huge TAM expander. And as Katsi points out, the enabling part of this is the partnership with Nokia, where integrating with the AirScale system by Nokia and the MNO 5G core, ASTS is not an outside provider. So going back to the tech differences, they're not comparable. if you're a separate roaming narrowband network versus something that integrates directly with the core. We are just another cell site to the MNO, which allows for it to be part of a hybrid network infrastructure. So very exciting, which goes to the next part around Amazon. So this will certainly be a volatile week. We had a volatile week last week. So Amazon entered the frame. By buying Globalstar. This was a competitive process, variable seller draft, and Amazon bought it for $11 billion including debt. And of course, ASTS is hammered as people read the prospects of a new competitor. As I look at this deal, it was just an absolute no-brainer for Amazon because if you just work backwards, the N53 spectrum that they had, as part of this is going to be useful for Amazon for its data centers and warehouses. It's a private 5G frequency that allows them to really do Wi-Fi without any public spectrum use. And then they'll be able to do this for other people. And I don't know what that's worth, but it's probably worth a lot for them, all their robots and things like those. And then you have the Apple contract, probably not terribly important in terms of its immediate financial application, but it probably ties in more with Amazon getting a lot more AWS work and sets some optionality for the future and keeps it away from SpaceX. And you also get 26 megahertz of spectrum, which is going to be immediately very valuable to Amazon for its drones and IoT. And then they can say they have a DC offering, whether they ultimately do or not. TBD. But again, it keeps it away from SpaceX, keeps Amazon in the game with a placeholder option. The market is not very optimistic about Amazon. And so as I was reading some sell-side reports, the market is currently putting a negative value on Amazon LEO with people just really focused on cash burn and the very uncertain prospects of success, whether that's correct or not, we will certainly find out. But it just goes to show you that the stock market is very negative on the prospects of Amazon Leo, less so after this deal because it showed maybe a path to go forward. But I really don't think this had to be a deal that was well thought out by Amazon because for $11 billion, it's 5% of their CapEx budget. Immediately you have some spectrum you could use. You're also really going back to a spectrum holding company. Buying spectrum is kind of like buying Bitcoin. It's just kind of a cash equivalent in a very loose way. And so by buying something that once gone, you can never get again, but if you get it and change your mind, you can easily sell it and it fits into the strategic optionality for what you think is potentially going to be a very big part of your business. Is an eminently smart thing to do. But a lot of people pointed out, like quite a few links here in this one tweet, as a lot of people pointed out, Amazon's not in the business to white label this service to Apple, is at least the hot take. That would be pretty small thinking as opposed to some far greater integrated idea. And that's personally what I think. going on and whether it extends to the potential absurdity of a Fire Phone, which we'll get to next, the use cases for Amazon to have integrated connectivity to consumer hardware is very obvious. That makes sense. And so that starts to maybe put pressure on MNOs in different ways, but is not directly comparable to what ASTS is going to do. Most importantly, I didn't see a play on Or Amazon was actually going to build this in a smart way. And so they're maintaining their contracts with MDA. MDA is a third-party contractor. To my knowledge, there's never been a successful constellation done with third-party contractors for very simple reasons. You're going to get hosed on the costs and you don't have the short cycles for iterations and innovation. You have someone that has materially different incentives and goals than you. They're not aligned. And the path to rapid innovation is not there. And so for them to replicate what ASTS has seems simply inconceivable. And so far what we know is that their satellites are going to be at a much smaller scale. Anyway, I was actually talking to some AST people about this today, and they just were kind of scratching their head at how MDA would have a competitive offering. And I think the simple conclusion is that they will not. And that, that is actually not part of the plan. So I think the Amazon news from this week was probably ultimately a non-event for reasonable expectations of the stock. Although, people, I really want you to have a thought experiment of would I rather have traded to SpaceX and sort of strengthened the monster I already know, or have a new little monster that took some strength away? from the big monster, but now I have 2 monsters. And so net-net, I'd rather probably have one strong monster, which I already feel pretty comfortable about how we're fighting against, versus adding the other single greatest entrepreneur in the history of humanity who has been largely successful in almost everything he's tried. Yeah, I don't want to draft that guy into the ring in my Waffle House cage fight, but here we are. And then you just go, well, at least ASTS has been a company forged in fire, has already had to be achieving success in light of facing by far the most formidable competitor ever with SpaceX. And now there's just a new entrant, which is just simply Globalstar recapitalized without an immediate plan and no evident change in their technology. Certainly better capitalized. Not really clear to me how this changes the long-term picture. Would've been better if Globalstar had just decided to wave the white flag and liquidate uneconomically, but no, such is not to be the case. But Amazon immediately fires back, no pun intended, and decides to alienate itself from all MNOs by announcing a Fire Phone. And so people just can't quit the idea of owning their own platform for good reason, because that's where it is worthwhile. And so Meta would do anything to have its own platform. It tried with Oculus. Burned a lot of money, but was worth it because if you can find the next platform shift, you control the world. And these guys know that, so they have to try. And so for Bezos to have a successful GAC business, that's not particularly interesting given the current enterprise value he has to defend and increase. Taking a shot at a new winning consumer device that then pulls in all sorts of value from content, compute and so forth. That is interesting. Take a bet on that, and if it fails, you can flip the spectrum anyway. But in the meantime, how does AT&T feel about that? Probably not great. How does Apple feel about that? Probably not great. So my view is all these other guys are going to be again looking at who is really the carrier-neutral option. who's not going to be a competitor to them, and you probably want to do business. And so one tweet I found to be particularly useful is this one from Alex from Babylon this week, and he went, at the risk of stating the obvious, the richest men in the world are not buying unaccessed spectrum for $10 to $20 billion just to white label it to legacy MNOs. That is a short to medium-term fairytale story, and I'm quite sure nobody serious is falling for that anymore. They bought this to supercharge their Leo connectivity bundles, Leo Prime and its Starlink equivalent, directly competing with those same MNOs long-term. So this is really the fiber competition and to power their own AI at the edge ambitions without middlemen. ASTS is literally the white knight in shining armor here for the MNOs. Without it, they're at long-term risk of being cut out of the rural customer. So my own comment is, once you start to lose a segment of the market, you start to be at risk of losing all of the market because you start to get weaker, less financial power, things like that. Slippery slope. And meanwhile, ASTS continues to strengthen its own global spectrum campaign. And so Mega Constellations and Justin Barrett were out really showing that ASTS might actually be the acquirer of the remaining sort of legacy carriers that need to do something like Iridium and Viasat, but also ASTS is trying to get it for free. So there's still this very active docket discussion where ASTS is going after these S-band rights in Chile, Brazil, EU, et cetera. And these can just be a warning by the government and something to follow pretty closely. So I don't want to dismiss the power of Amazon. It's also worth noting that in the next tweet that Amazon has been successful at winning over some of these aero lines from Starlink. So again, formidable competitor, not to be dismissed, but we have to start thinking about what is the real strategic goal of Amazon. And once identifying that strategic goal with the reaction of other companies in the ecosystem, to respond against that threat and whether the friend I already have in ASTS also enables me to fight back against my enemy, increasing them. But also, do I want to strengthen my enemy who is the wolf in the henhouse? And the answer to that is a resounding no, which is why MNOs don't want to work with SpaceNodes. And I can see a very strong argument. They're not too keen to hand over everything to Amazon either. There is some speculation that Amazon as a spectrum holder could in fact economically be another MNO for ASTS because now that they have the spectrum, the question is how to light it up. Does it make sense for them to put birds in the air for different use cases they have, or do they actually hire ASTS and utilize the spectrum through that? Given the relationship of the companies, which is friendly, It's entirely conceivable that that's true, but we could certainly put that also in the, in the hopium bucket. Just because a bad week likes more bad news. We had the Rakuten, we had Rakuten, who's a large shareholder, start to sell their shares. That I think is, you know, unrelated to everything. Although now everyone's probably like, Mickey knew, Mickey knew that the second stage wouldn't burn right. And he sold in advance. Well, no, he didn't. But Rakuten is overleveraged. Being a holding company for third-party investments is not their business model. They're not SoftBank. They have an overleveraged telecom company in Japan that's struggling and has interest rate shock, and they have a massive winner with this. And so they're blowing out of it. So that just does provide a technical because it's like any syndicate trade. Once that's signaled to Wall Street, it's just easy. You just lean into that because you kind of have a free option to the short side when you know there's a big seller holding a bunch of stock. So even if you're a buyer of the stock naturally, you're just going to pull your bid and know you can get it, get it back a little cheaper because you have this publicized seller and Wall Street will certainly lower the price to help clear that stock. So that's going to be a bad technical question is whether it was already realized or not. And then really going back to the production queues, seeing the Antonov in Midland is important because it's giving us more visibility into some of the critical path items, namely being the composite wings. So those are being dropped off, or it might have been the flight computers is what looks more likely. And so we have the arrays We know arrays don't do much good unless there's a control set to process the signal. When those are coming, it just gives us more visibility despite the pessimism that the ramp up in production capacity is coming and will accelerate. Some of you may not be there for it. I get it. A lot of people give up. They get consumed with the negativity, lose the ability to have a perspective. And then wake up in 3 months and then everything's firing and they go, where did I go wrong? And where they went wrong is they didn't spend 5 to 6 hours every week compiling a weekly update and livestreaming it through stream of consciousness to really internalize what the future looks like in 6 months versus what the most recent past looked like. That's the difference between people who keep their head on and people who don't.
[00:30:43] Speaker B: Yeah.
[00:30:44] Speaker A: So just remind people of that based on our limited experience trading Perps Curious. And then we also have FCC meetings happening. They don't need that approval yet, but it continues to go through or past the comment period, both for SES approval and the GAIO. And so those could come when they need to come. We don't yet need them, but I would expect they're going to come. And Brendan Carr, has been out publicly saying that we're evidently approved because we're deemed to be one of the 3 competitors. And then there was a sell-side note, but everyone can read that in their own time. So thank you. It was great meeting a lot of people this weekend at launch. I know we all left really excited. It was really incredible to watch a successful booster land. Clearly shortly thereafter punctuated by the uncertainty of what an off-nominal inclination or off-nominal orbit means, then we'll find out. And so never, never fear that I will be shitposting in a humorous way, whatever the answer is, good or bad, doing my own mental rationalization, which is my process and mine alone. But I'll invite people on for a ride. So I hope everyone has a good trip back to their respective homes if they're alive. Otherwise, I hope people keep doing good work and reflect on what's material and what's not, what's emotional disappointment versus what a killer would think if you want to be a business killer. And maybe the answer is panic. That's not my reaction, but it might be the right one. So I'm not going to advertise the narrative of the future. But remember to stay calm and carry on. And meanwhile, I've done 36 minutes doing the Hakko workout with my inclination of 7.5% and my orbital velocity is 2.5 miles an hour on the treadmill and burned 261 calories while talking to you guys. So try to be productive.
[00:32:53] Speaker B: Thanks for Thanks for listening to the AST SpaceMobile 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 SpaceMobile, make sure to subscribe. Thanks again, and I'll see you next time.
[00:33:13] Speaker C: We're doing something very, very big, and I think we need to know that. we can really affect a billion lives. AST SpaceMobile is the only company that has proven technology to deliver cellular mobile connectivity directly from space to the everyday smartphone. People will just basically turn their phone and be seamless regardless of where you are. We don't want the user even to know that it's connected by satellite. Our role is to bring this into reality. Listen, partner, to the animals.
[00:33:54] Speaker B: Listen.
[00:33:59] Speaker C: Mmm, waffles.