Anpanman - The Inevitability of SpaceMobile: Bluebirds, Bond Math, and Blue Origin

[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.
[00:00:28] Speaker C: Hey everyone, I'm back. Thanks for joining this afternoon. I decided to fire up a space just given all the various news that's, that's come out recently and just wanted to share a few thoughts. But, um, but yeah, I was away for the long weekend and for an extra day or two skiing. And so I was pretty much out of commission. And then, um, We came back this week and I've just been settling back into the routine of things. But yeah, I wanted to fire up a space and talk about AST SpaceMobile. So I guess before I start, I just did want to discuss the macro backdrop. So, you know, we've had a pullback in small caps. There's some uncertainty around interest rate, the interest rate environment. I think obviously PCE came in a little hot today, and so people are trying to figure out if the Fed is going to have any room to cut, which I've posted some information from Truflation, which is a real-time data provider. They survey thousands and thousands of price points across different, you know, if you'd imagine what BLS does with their inflation, data, which is stale and perhaps 2 to 3 months late. These guys actually do it in real time and they do a survey across more data points. And so if you look at the trends, what Truflation is offering, it looks like inflation continues to crater. But yeah, I mean, you've got various Fed governors saying that perhaps we're going to pause and maybe inflation is stubborn and maybe we might even move to an environment where they're raising rates. But what I've come to find is that Truflation is a leading indicator by 2 to 3 months relative to what is actually reported by BLS. So yeah, it looks like inflation may even go negative. So I would just keep that in mind as we, you know, you hear from these Fed governors jawboning about how inflation has been stubborn. But I do think interest rate cuts will continue to come. And so I think now, of course, the market is having some level of heartburn, but I think that will eventually happen. And of course, we've got the potential conflict with Iran. You know, the markets always hate uncertainty, whether, you know, we're going into a potential conflict. And once it does happen, it usually— there's some type of relief afterwards depending on what the outcome was. And obviously, obviously no one wants to go into war. And, you know, the biggest uncertainty around that is whether that expands into something bigger or if it was small. You never know what's going to happen. So, you know, hopefully we have peace and there's some type of negotiated settlement or solution, but who knows? But anyway, moving on, I think maybe I'll first cover the topic of AST's recent convertible bond offering, which I did cover before, but while I was thinking about it this past week, I actually went back and looked at the historic shareholder or bondholder of each of the issuances that AST did previously. And with the help of AI, because candidly I was a bit too lazy to try to go through each of the holders, which, you know, I have a pretty good sense of who is a hedge fund and who's a long-only, but with AI you can do a deeper analysis and come to a, hopefully a better educated guess, but going back on AST's previous convertible bond issuances, if you look at the one that was done in January of 2025, that was a $460 million convert. And the composition, if you look at the holders, which you can get this information through Bloomberg, it looks like about 55% of that issue was allocated to hedge funds. And typically when hedge funds buy convertible bonds, they are doing that as arbitrageurs. And so they'll go long the bonds and then they'll short the deltas or the, you know, they'll hedge out the underlying warrant that you get with that convertible bond. And so typically at time of issue, you might be on a 60% delta. And so if you do some simple math, say for example, or actually I'll go into the math a little later on this, on our specific issue that was done in February. But back then, you know, the hedge fund composition was pretty high. And so as a result, there was probably a pretty significant amount of short selling to hedge out the underlying warrant. And the way that convertible bond arbitrageurs make money is that they look to, they have some optionality with that warrant and they look to monetize it over time. And so what that means is As if you have an underlying stock that's pretty volatile, then you'll trade around the deltas where if the stock goes up, then you'll be even more long the stock just given that the warrant has gained in value. And so you'll short more shares, or if the stock goes down, you'll cover shares. And so from that volatility, you'll basically chop out profit here and there, and that's the way that you can monetize that bond. And so If a company has a high level of volatility, then convertible arbitrageurs make quite a bit of money by hedging deltas. And then of course, like there's a big event where let's say, you know, something positive comes out for AST and the stock really gaps up, then as long as those convertible arbitrageurs are on a delta that's not 1, meaning they're not fully hedged, but you know, they'll make money on the warrant because it increases in value and then they'll hedge that out. And of course, like if the stock drops, they'll cover their hedge and they'll hope that the stock goes back up and as a result of covering low, they can put out the hedge again. And so yeah, that's in a nutshell what convertible arbitrageurs do. They're not necessarily focused on fundamentals, but they want to be involved in a security that's going to have a high level of realized volatility versus expected volatility. And if they can trade that properly, you know, they might have a view fundamentally of the company. Maybe if they're bullish, they'll go on a light hedge, or if they're negative, they'll go on a heavy hedge. But they'll look for ways to extract as much profitability from trading around that bond as they can. And so those are hedge funds. And then of course, long-only guys who are buying because they fundamentally like the credit, meaning You know, they like that, that ASD is, from a fundamental perspective, they think that things are going to go well for the company and they want to own the bond. They'll collect their, for the most recent issuance, 2.25% coupon. And then they've got this upside option where if the stock performs really well, then the bond will gain in value because then equity underlying the bond will become worth more than the bond itself. And so in the future when that happens, when you have an appreciation in equity, then you would exercise eventually. You don't exercise early, but you would eventually exercise the conversion and take delivery of shares and basically the debt, the underlying debt gets extinguished. But yeah, so in the January 2025 issue, there was 55% hedge funds and then July 2025 when the company did a $575 million convert, there were 66% hedge fund owners. And this is percent ownership as a number or the total issue versus number of holders. And so this is an accurate reflection. But back in July 2025, you had a bit more hedge funds. But then interestingly, in October 2025, when the company issued their $1.15 billion 2% convertible note, which was a 10-year you know, it's rare that you ever see a 10-year paper. Usually it's like 7 or 5. That one only had 23% hedge fund participation and 77% long-only participation. So what that means is that in that particular issue, there were less hedge funds, and then as a result of that, there was probably less hedging that was going on, meaning less shorting of the bonds. And so if we look at You know, just doing some simple math, the most recent issue that we did was $1.15 billion if you take into account the overlotment option, and then the conversion price was $116.30, which is a 20% premium versus where, you know, the stock had closed when they launched the offering, which was, I think, like $96. If you take $1.15 billion, divide that by $116.30, that gets you to 9.9 million shares. underlying that bond, right? And so we assume that, you know, if it's 40%, let's see here, let's just assume that, I think this is going to end up being pretty high. Well, let's just assume that 30% of the issue was allocated to arbitrageurs. And so that would be 3 million shares to hedge if they were on 100% delta, which they aren't going to be. And so they probably are going to be, I'd call it like a 60% delta. And so if you assume that 30% of ARBs, hedge funds received an allocation in this deal, then that resulted in only, call it 1.8 million shares to short. And so of course we saw significant pressure on the company stock, which I think is probably people taking advantage of the offering who went short. And then of course the market pulled back and any number of things. You know, you have people who are panicking and they sold. And so if it was only 1.8 million shares short to get hedged, you know, we have certainly gone well past that, probably in the first day. But definitely I think any residual impact from hedging is probably gone at this point. And so I just wanted to point that out because I think, you know, in previous issues, We thought that maybe there was probably going to be 2 to 3 days for things to settle out, whereas I think this time around it's probably done. And so I think at this point, if some of these catalysts hit and things stabilize with the market, I think the company is pretty well positioned, or the stock is well positioned for a pretty big rally, which leads me to the news that came yesterday. We learned that Bluebird 7 was encapsulated into Blue Origin New Glenn's fairing. And so if you look at the timeline of at least for ISRO, which is not an exact, you know, all these things in terms of precedent, they're not going to give you an exact timeline. Of course, things can change and maybe the process with Blue Origin is different than ISRO. But if we look at when the company had encapsulated the Bluebird 6 into LVM-3's fairing, a launch date was set. I think it was like 4 to 5 days after. And so I had put a timeline in a tweet earlier about how, you know, if you— if it followed Bluebird 6's timeline, then we're probably looking at a launch date being set sometime in about 4 days. And then from that point, Once launch date is set, you know, that from the 24th, then you're probably looking at something as early as February 28th to sometime in early March. Now, there's obviously like a lot going down, going on at Cape Canaveral. We just learned today that Artemis II is— the target launch date is March 6th. And so that would mean that either Blue Origin New Glenn 3 with Bluebird 7 is going to launch sometime before then or sometime shortly after. And with Artemis II's target date, you know, they're looking at no earlier than March 6th, but then that could get delayed, you know, if weather or other complications. So, you know, I think there's dates of March 7th, 8th, 9th, and 11th as alternatives. But I would expect that Blue Origin New Glenn will probably launch sometime in that timeframe. You know, on a day that happens either before or after Artemis II. And so for those who are interested in going down and seeing the launch, and I'm not sure how the company's gonna, you know, provide invites, but you might get a chance to actually see both launches back to back, which would be pretty cool. Some people have asked how the company would invite shareholders and is it gonna be based on the number of shares you own or anything like that? I don't think that's their approach. It's going to be probably a lottery system and you might have to prove that you do own shares, but I don't think it's going to be dependent on how many you own. But as I said before, I don't think that there will be a lot of slots available just given that there's probably going to be folks from Blue Origin who are, and guests of Blue Origin who are going to be watching New Glenn launch. And so Whatever happens, it's going to be a pretty packed house. And either way, if you don't get a direct invite, you can still go down there for launch. But you know, this, the setting, I talked about this earlier, but previously when ISRO had finally set a launch date, that kicked off a rally in the stock price from what was, I think it was when they announced Let me see here. When they announced the encapsulation and that they had sent, but specifically they set the launch date and that was on December 19th. They set the launch date for December 23rd. The stock rallied about 69%. Yeah, great number. But I do think once we get that launch date scheduled, you are going to see the stock pick up in expectations of that launch. And then of course, In the meantime, in between the setting of that launch date and of course launch day, we also have the Q4 update, which is probably going to be chock-full of update news and other things, which I'll cover a little later. But yeah, the next 2 to 3 weeks are setting up very bullishly. And now obviously, if the US attacks Iran this weekend or in the coming days and perhaps, you know, some unforeseen things happen there, then, you know, the market in terms of macro backdrop, that could overwhelm any particular, you know, micro thing that's happening with the stock. But from my perspective, I think, you know, the company is setting up quite well for a rally in the next few, 2 to 3 weeks. So for its worth, like I've taken some upside risk to take advantage of that in case it does happen. But anyway, moving on, um, AT&T in their tweet, they disclosed that they're expecting beta testing to start soon. I know some people have discussed the idea of, uh, getting it to 25 satellites first before beta testing rolls out, but I think, um, I think beta testing could start sooner than that and could already be underway with the first You know, five Block One satellites, and then you know as we add additional satellites, that beta testing will become more thorough and comprehensive. But but yeah, I don't think it's going to be predicated on twenty-five satellites being up in orbit. I think it's going to happen sooner. But but yeah, we'll see. Another interesting thing this past week—I think it was last week—AST filed with the FCC. That they were pursuing 2 GHz spectrum globally, and specifically it's 1980 through 2025 MHz for uplink, and then 2160 to 2200 downlink. And so if you look internationally, the 2 primary holders of that spectrum are EchoStar and Viasat, which Viasat acquired Inmarsat, and as a result received that company's spectrum allocations. The key thing here is that AST is angling to get an allocation. They perfected their spectrum rights by buying Savvy, I forgot the company's name, but they have priority rights for 2 GHz spectrum globally. And they appear to be well positioned to receive a 2 GHz spectrum allocation from the EU, which is going to happen in May of 2027. And so as most of you know, AST formed a joint venture with Vodafone and that it seems like they are likely going to get an allocation, whether that's 10 by 10 or 15 by 15, it remains to be seen. But the fact that they are pushing this actively at the FCC just shows that they believe they're well positioned and that EchoStar and ViaSat Are probably going to get pared back. But you know, it's it's a one of the puzzle pieces kind of hinting at where the company is going. Let's see today I I did drop this Israeli podcast interview with Roy Sofer. He is a senior vice president of engineering. He heads the Israeli office, which is focused on a lot of the RF. the chip development and RF processing. This guy actually joined the company, I think it was back in November of 2021, and he's been a senior engineer ever since. And so for those who haven't seen it, I definitely recommend reading that interview. A friend of mine was able, well, a friend of mine found the interview and then translated it for me. And then I shared it out with everyone. And I think at some point, maybe I'll do a space specifically to cover that interview because there's so many great nuggets in there. But highly recommend, you know, if you haven't read it, to go back and read it. It's, it's, um, it's got a lot of great insight, um, and also some competitive insight as well. Um, let's see. So another thing unfortunately that happened this past weekend was, um, these massive snowstorms out in Northern California. And I did share out this article covering how 6 of 15 skiers, unfortunately, you know, 9 have perished, but 6 were rescued and they were able to use their Globalstar SOS messaging to help rescuers find them and locate where they were. And so I think it's just another reminder that these services, you know, 100% connectivity no matter where you are, I think perhaps people take it for granted that, hey, I don't really need this I don't, I'm not going to use it day to day. And, you know, if I'm in a dead zone, then it's okay. I can live without internet. But, but that, you know, tragedy in particular just highlights the fact that if you have, whether it's for you or for friends or family, any loved ones, having connectivity is critical because you never know when you're going to be in a situation where you'll need to, you know, contact first responders and be in a situation where having connectivity is a decision between life and death. And I think that tragedy over the weekend is just a reminder for me, especially with small kids, that once this service does roll out, I'm definitely getting it for my entire family. And yeah, it's a non-negotiable type of thing, whereas again, I think people would argue otherwise, but at least for me, you know, person who has a family, that's something that I'll get for every family member. And then finally, I guess I wanted to talk about the Q4 update. You know, the company set the date for March 2nd, and so that's a Monday. They're going to report earnings after the close. There shouldn't be any surprises, obviously, from a financial perspective because the company already pre-announced results. They said that they expect revenues of $63 to $71 million, and gave a range also for expected operating expenses. So in particular, that update, you know, I do expect that we'll get an update on the production cadence for the composite satellites. And so maybe we'll get an update then, if not already by the time that earnings update comes. But, you know, we should get an idea of where they are on production cadence and when they expect to send the first 2 batches of 3 satellites down to Cape Canaveral for the Falcon 9 launches. I also think we'll probably get some color around Golden Dome. There's also some rumblings about potential MNO-dependent agreements. Maybe we'll get, you know, an update there. Maybe there might be some new ones. And then anything around non-dilutive funding and of course FirstNet. I mean, I think at this point, we all know the company and AT&T have a contract in place with FirstNet, but then, you know, when will they release the details of that? So that might be another topic that they'll cover. And then of course, any color around the company's application for US market access with the FCC, which I think, as I've said before, I think could get approved imminently at any point now. The other thing which I would encourage people to do is send in questions, because as we all know, the company does take questions from retail investors first before they move on to sell-side analysts. But I think in that earnings call, and I know some of you've already done this, but I think it'd be worth asking questions around the data center opportunity in space, because I think the company in the last convertible bond issuance hinted at monetizing their underlying technology for AI applications, and so that would be a natural question to answer—or sorry, ask—and then I think also anything around Golden Dome, you know, production cadence, any any one of these things, I encourage people to ask questions. And you know, it'll be it'll be interesting to see if Morgan Stanley, you know, which analyst will join on that call, whether it's Adam Jonas or forgot the other. you know, their analyst's name who covers the space sector. But if we get Q&A from either one, that would be very telling in terms of potential research coverage. And then of course, if the JP Morgan analyst also joins the call as well, that'll be a good indication that they're working on initiating coverage. Let me see here. But yeah, that was what I wanted to cover quickly. I didn't have, I guess that actually was quite a bit, but Let me see here. Let me see if there's any questions. Someone's asking, what do they plan to do with the new offering? I did cover this before. I think they're accelerating, in my opinion, I think they're accelerating production for the mid-band Bluebirds and then also potentially doing something around AI data centers. But then they did outline source, use of proceeds there. So, you know, I covered this before, so I won't go through it in detail again. Um, also the person's saying, how will they manage to do 4 launches before Q1 close? Um, they will not be doing 4 launches before Q1 close. Uh, clearly, you know, they're behind, uh, schedule here. And so my guess is that we'll get 2 launches, 2 more launches before, um, Q1 close, maybe 3 if we're lucky. But so, you know, instead of 5, it's going to be 3 to 4. And then the others are going to spill into Q2, which, as I said before, I think everything that the company is doing is difficult, especially for the first time. And so they're going to be methodical and ensure that when they launch satellites and deploy them, they're going to get it right the first time. And so at this point, As I've said before, you know, where the keyword is inevitability, right? And so the company is going to get the constellation up, you know, whether they get to 45 or 60 by the end of the year. And my guess is 60 is probably too aggressive, but it's going to be closer to 45, but it's going to happen, right? And so whether that is on a timeframe that is, you know, a few weeks off or a few months off, I don't really think it's going to matter just given, again, you know, the service is head and shoulders above what Starlink or any competitors can do. And so at this point, it requires a bit of patience and just sitting back, right? And so I think for me, after they did their convert, when they did their convert and heading into the period that I've laid out before where we have these launches that are taking place, I'm really excited. Right? And so even though the macro environment is shaky and of course the stock is off, I mean, I think we've had like almost a 40% drawdown from the peak of $130. I think we're going to go back there pretty soon. And so I'm very confident in that. And so I'm not sweating it. And I think for folks that have had, you know, some difficulty in processing that the stock was at $130, now it's at like $81, even though, you know, the company raised $1.15 billion and you've got all these catalysts ahead of you, just be patient. Like, that's the volatility is going to happen. You know, if you take any look at any number of high beta names, it's been a pretty crummy February, which I think Kook was right. You know, he was predicting that perhaps February's going to be somewhat ugly and it has been. But, you know, volatility is for the patient investor and for someone who's not on margin, it's your friend, right? It allows you to to have great entry points. And of course, you know, when things get better and, and you have rallies, you can take advantage of that as well. Um, but, but yeah, I'm, I'm very excited myself. I'm looking forward to hopefully going down to the Cape and seeing some of you guys, uh, who end up making it. Um, of course, it's the uncertainty stinks. Not really sure when it's going to happen, but, um, once that date is set, like, I'm Yeah, I'm, I'm excited. I mean, it's gonna be great to see Blue Origin New Glenn and Bluebird 7, you know, launch together, which will be a tremendous sight. I mean, just seeing the photos yesterday of the fairing with AST SpaceMobile, you know, branded all over it, um, it's great cuz I think this is gonna be a huge event for Blue Origin New Glenn, you know, retrying booster, uh, the New Glenn Booster 2. Proving that they can refurbish these things and launch them again is going to be huge. And so the amount of publicity and PR attention that's going to come, not only for Blue Origin, but also for AST SpaceMobile, where people are going to ask, oh, what are they launching and what's this company about? I think it's going to be a tremendous coming out moment for the company. So anyway, that's my quick update for today. Yeah, maybe I'll try to do another one this weekend, or I guess after Cook's Sunday night update. But yeah, I guess a reminder, you know, I'm bullish. I'm looking forward to the next 2 to 3 weeks. And, you know, regardless of what the stock price does day to day, the noise, and obviously there's quite a bit of uncertainty out there in the market, I think all indications are up and to the right. And so I'm very positive and looking forward to the launch and additional news that's coming out. What I will try to do, I'll try to update the Catalyst Monitor and I'll send that out in the next hour or 2. But yeah, there's a lot to look forward to and yeah, just remind yourself of the milestones that we've achieved, which you'll see in the Catalyst Monitor and what's coming because there's quite a bit. So anyway, thanks for joining everyone and we'll talk to you again soon. Take care.
[00:29:06] Speaker A: 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.
[00:29:27] Speaker B: The Lord believes I'm very, very big. And I think with this technology, we can really affect a billion lives. AST SpaceMobile is the only company that has proven technology to deliver cellular broadband connectivity directly from space to the everyday smartphone. People will just basically turn on 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, always in partnership with the animals. Listen.
[00:30:13] Speaker C: Mmm, waffles.