$ASTS Could Rip 10-20X From Here

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[00:00:59] Speaker C: Okay, good evening, everyone. Welcome back to Fight Club, where we all somehow chose to get the snot knocked out of us every day. Certainly seems unending. I know I'm a pretty good proxy for sentiment, which is why people call it the Kook Bottom, and I am definitely rock bottom. Someone made the joke because I had a colonoscopy on Friday. someone said the actual kook bottom, and I thought, why didn't I think of that? Because that was pretty funny. But when everyone's staring at charts, basically everyone has me scared to death now that the charts say we're going to 38. And what's always interesting is I respect people that use TA. Some people have been very successful. My personal belief is that the statistical edge with TA is still chance, but other people, some people have latent skill that they apply on top of it unbeknownst to them. So while looking at something which might be pure chance, they have good instincts which allow their results to exceed chance. That's my personal sort of theory on all this. But when I'll just throw stuff into Claude and unleash Fable 5 on it, just saying, you know, what do you think? Let's backtest it. And sure enough, it's very difficult to be Warren Buffett because of a line on a chart. Again, not to take away from those who do it, I just personally believe that those people have really good business instincts and they're applying something unbeknownst to them on top of charts, but everyone is bearish as hell. I'd like to say including myself, but I'm really not bearish. I'm actually really optimistic. But the negativity can really get to you. So I get why people are crashing out. You know, you zoom out a little bit and you realize our stock chart looks like everyone else. And some guy was coming after Anpanman. This deep value bagger for some reason just has it in for the panster. Which I get it. Anpanman is super annoying.
[00:03:01] Speaker B: Yeah.
[00:03:02] Speaker C: But like, just kidding. And then this guy's out talking about, you know, update for Sunday. I'm building a new house. And it's like, Okay, this guy has— it's like Bill Ackman light. But he was just kind of pointing out some stocks and Panamanian Pitch, and it's like, oh wow, so small-cap event-driven names that went down since June? Wow, I knew this guy was a fraud. And it's like, oh, other than the 400 other stocks that look just like it. And so unfortunately, it doesn't matter that other stocks went down. What matters if you are a long-only investor like yours truly It matters if your stock went down and my stock did go down. But I look at a Rocket Lab chart and just for the clarification, I have no animus toward Rocket Lab. I think it's a really cool company. I hope they do well. So I'm definitely not part of this ASTS feud. It's kind of like West Coast, East Coast rap war. I'm not out to kill Tupac. Let's put it that way. Or I guess I'm a West Coast guy, so I'm not out to get Biggie. I say embrace the music. But same chart, I'm just looking at it right now. And you got to pick your spot because charts are all the same until they're not. And so in the short term, they all trade on the same factor risk, but over time, there should be dispersion based on actual results. But when I started this week, I just take a step back as well and go, how many times did Trump tweet about space? And so we have a space academy. We have all of these inducements. It's very clearly the focus. I had sat, I think I'd said this about a while back, but I had sat next to a woman from the State Department on a flight, and this must've been a year ago. And her husband worked for the Space Force. And it was, I was talking to her and she said, well, yeah, you know, what people don't really realize is first of all, Space Force is very small, but this is the number one priority of the government. This is where they think the defense edge is. I took that to heart and everything we've seen so far is consistent with that. And everything we've seen from the way other countries are acting in terms of getting sovereign constellations is consistent with that. And so at some point this matters. We certainly don't have a headwind. That's what we certainly don't have. We have a tailwind. And one thing that sticks with me a lot are other people saying, oh, the space bubble popped. And, you know, it was, this turns out was a bubble in June. I just don't know if I'd buy that. Bubbles are usually these mass hysterias that go very long and have widespread buy-in and usually last kind of a while. If this was a bubble, this was a really crappy bubble. This was, to me, kind of— I don't know what it was, but it was crazy when it was happening. Stocks pump. Again, I have this Rocket Lab chart up. If you zoom back, there's lots of periods when it looked like a bubble. And so Rocket Lab going from $5 to $30, someone could have said a bubble, and then it popped, you know, to $17, you know, again, exactly like ASTS. Then it ripped to $48. Oh, is that a bubble? Well, no. And then it kept going and going and going. And to me, it just looks like this sawtooth of price discovery where excitement begets cooling-off phases to shake it out, make sure no one actually makes any money that's easy. but then keeps grinding higher. And I'm no Rocket Lab expert. I just learn about the company from time to time from guys I camp with. Guy's no longer there, but space is important to the country. And so they want a lot more launch capacity. Whether launch ends up being a really good value creator is an open debate, But applications in space seem to be pretty clear. So to start off, I just view it as one of these things where it's like understanding the groundwork that Clinton put into place with housing back in the late '90s. You just wanted to ride this wave. But when you think about when the bubble became a bubble, well, there's a movie about that with The Big Short. And unfortunately, I don't go to strip clubs, but I'm guessing that strippers aren't talking about the space economy, whereas in The Big Short they were buying multiple houses in Las Vegas in the Inland Empire. So correct me if I'm wrong. I'll leave this one to Corey to do some diligence at strip clubs and let me know if in fact they are talking about space and 5G technology and backward compatibility with 6G. If that is coming up at strip clubs, then I stand corrected and I will sell all of my stock. So please Please go out there and help me understand if we're actually in a bubble. But meanwhile, we have progress. So step by step, paso a paso, we have a constellation growing. So Dr. Aaron Thomason has been carefully tracking all the drag data, looking for evidence of unfurling. I could do it myself; I just haven't gotten around to it. At this point, I almost don't care because it's not a tradable event for me. And so the company's done a remarkable job executing and unfurling. They clearly have it down. At some point, it wouldn't shock me if at some point, because of law of large numbers, we had a failed satellite. We already did have a failed satellite, but that was because of Blue Origin. But at some point, maybe this mechanism doesn't work. I don't know. Certainly it looks really reliable so far, but we had Bluebird 12 and 13. pop open instead of one at a time. Now we're doing 2 at a time. And hopefully we get Bluebird 11 soon. Hopefully that Bluebird is also doing well. We have no reason to believe it's not. Looks like it might have been partially unfurled. And then the company gave us update that Bluebird 14 is complete. Yay! And Bluebird 15 and 16 are nearing completion and not far behind. People were actually disappointed by this. I, I get really irritable because people have figured it out. Um, And I liken that to the special way in which my brain works. I think if I were back in grade school today, I would certainly be receiving an accommodation. I unfortunately grew up in an era where that thing didn't exist, but I have a unique ability to focus on things that seem very important to me and then tune out things that strike me as noise. And it doesn't mean I'm right. It's just how my brain works. And so for a lot of people, most, they are extremely clued into the— and I don't want to diminish this, but the minute details around very near-term and specific guidance. I'm not. And so my belief for the company is that they will ultimately deploy their constellation on a timeframe that allows them to capture the opportunity. You will note that that is a loosey-goosey goosey goalpost because I basically give them all the time in the world. The reason why I have that viewpoint is because of my professional background. Unlike most people in the stock market, and probably unlike most people on this call, I deal with growth companies that are private, and I don't know that we've had one ever hit guidance. ever. What I deal with on a day-to-day basis is companies that are actually doing well and executing well and have good teams will all of a sudden surprise their boards and go, oh, by the way, we have one month of cash and we didn't tell you. And then I get called in and other people sort of run for the hills and they're like, hey, Cook, can you handle this? It's like, well, guys, why didn't anyone figure this out? And so That gives you sort of a battle hardness. It kind of reminds me of one of my neighbors when I was growing up. His name was Spinney and he fought in World War II. And he would always tell the stories about all these V-1 or V-2 rockets blowing up over his head. This guy was like 18 when he was sent over to Europe. And, you know, eventually he'd say, oh, I kind of got used to it. You know, you're having rockets explode over your head. And I was just like pretty excited not to be dead. And puts it in perspective. You know, all of a sudden you get kind of used to the bombs crashing over you and you're just actually pretty, pretty excited. to have gotten a free pack of cigarettes and to not be dead. And so what I see all day are the realities of companies doing things that have not been done before. Of all of the companies that I deal with, ASTS being included in that group, ASTS is leaps and bounds tackling a problem of complexity that far surpasses anything else I've seen. And so I deal with companies that do things not necessarily related to bits that are also related to atoms, which means they make things, doing AI, doing autonomy, things like that. None of them are as—
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[00:12:53] Speaker C: Uh, cavalier is the goals that ASTS is pursuing. So the fact that ASTS has gotten this far is a minor miracle from heaven, and they have, yet the market is always treating it as if they're, you know, receiving guidance from Walmart where it's going to be hit within 10 basis points. I think I've said this before, where if a company like Walmart or like Dick's or something like that— which Dick's blew up last week— misses guidance, there's fundamentally something like really wrong, because the forecasting ability of these big companies, because of the law of large numbers, is very high. So when something misses, there's a reason why the stock market reaction can be violent, because it either means there's increasing competition or something like that. Best case is it's a cyclical decline. Worst case is a wake-up call in terms of some secular decline. ASTS missing guidance, it's like, all right, what else do you guys get to talk about? And so again, the fact that they're making satellites is something that the vast majority of all experts in the market said that they would never be able to do, yet they are. And so I have no idea why Bluebirds 15 and 16 aren't done yet. They appear to be almost done, but my guess is the company is testing the living shit out of them. And that makes me happy. Every time, in a way, there's a delay, it means they found something. And so they're improving the process. And that's the key to all of this is just getting huge amount of scale, which is why SpaceX is so unbelievable because they're able to pick up the 1 in 1,000-odd risk because they literally launch 1,000 times. No one has their ability to test and perfect, and ASTS is a test and perfect company. And if they catch something, it's great because I am much happier as an investor in this company having something slip by a week or two but having it fixed versus sloppy systems, um, and processes and then having a, a bigger problem in space where you cannot fix it. So I read this press release and I was really excited. It's going, we're going to be back on the pad probably in October. And you know, you're going to blink and before you know it, you know, you're going to have Bluebird 16 up there and then you're going to be getting guidance or guidance. I mean, guys, you're just going to be getting notified that Bluebirds through 19, potentially through 22 are coming. And this is all going to be happening faster, not slower. And so that's where you're going to get to the end of the year. And we're, you know, very possibly looking at 25 in orbit and people are going to be like, well, kook, they got it for 45. But I go, remember, I have this sort of learning disability where I ignore things that don't seem to matter to me. And 45 was always this fake number. It'd be great if they hit it. That's what they said. So why was I going to doubt it? But it doesn't really matter. The whole thing that matters to me is, are they eventually going to get there? And if they're eventually going to get there, this company is going to be worth a lot. That's how I'm investing in this. And the result of this dichotomy of other people having expectations, which matter, is that you're going to have a very volatile stock. And so any sort of letdown is going to have a pronounced downside volatility impact, but then ultimately the grind higher. So again, looking at a Rocket Lab chart, what do you see? This sawtooth, of up, a lot of volatility, certainly violent, but up. What do you see when you look at an ASTS chart? Lately, you see down, but you zoom it back out, you draw a trendline, it's up. And so why is it up? There's value creation happening. There's a market that is unfolding, no pun intended, right before our eyes, And people are waking up to it, but there's a ton of noise, ton of volatility. It's not a clear picture for everyone. But in the meantime, our production keeps growing. And so we had the Antonovs land again. I don't know if there's a company that I'm aware of that has a more dramatic supply chain, which is kind of cool. But we've got more of these ceramic casings hitting. The company is just pumping and getting more of these satellites ready. I call it a pig in the snake. So you can see this working through the python of the supply chain. It's happening. And I think people can generally also just see it. It doesn't require incredible analytical skills, but I don't know that the market's fully woken up to the impact of what happened. So if you fast forward 6 months, which seems like a lifetime, honestly, You're going to be within spitting distance of 45 satellites. You're going to have almost every MNO banging down the door. You're going to have initial services. You're going to have prepayments. You're going to have JLEO and things like that, and a whole host of other things we don't even know about. All of these things are going to be happening, just like if you reround a year ago, you would've just actually round-tripped the entire stock price and be like, well, this was bullshit. But you have learned a lot and made a lot of friends, but you also would have felt a lot better about what $60 means today versus what $60 per share meant a year ago. Cold comfort for me, I'll tell you that. I felt a hell of a lot better about everything when the stock was $130. I super duper, duper hate it at $60. It has a massive wealth effect impact for me. It totally changes my mood, makes it so everything sucks. And so I don't want anyone to think that I'm like, oh, whatever, volatility's fine and just be tough and buy the dip. No, I'm in a bad mood and that's what I have to say about that. But I'm trying to be rational. This is why doing this weekly actually helps me because it helps me organize my thoughts because otherwise I'm just going to wallow in my own self-pity. I wasn't kidding when I was actually really excited to get my colonoscopy so that they would put me under with propofol. I was like, sweet God, just give me a break. And so I got to find some other procedures. Maybe there's other deferred maintenance I have to do on my body to help me ignore the market for a little bit longer. But I'm definitely not impervious to this. I'm suffering as much as anyone. But the fundamentals ultimately matter is my view. And so In my career, a lot of times the hardest thing to do is to do the work and then have the conviction and hold it. It's so easy to trade. It's so easy just to make it go away. And I was just thinking when I was surfing this afternoon, like, man, just like press that red button to make it go away. I could live happily ever after and just like teach my daughter how to surf and make fish tacos or something. But that's what the market psychology wants you to do. It wants you to forget fundamentals and join the crowd. Sometimes joining the crowd early is good. Certainly in hindsight, I would have loved to have sold a lot of shares at $120 and buy them back at $60. That would be a hero trade, but I'm not a good trader, so I didn't. What I do look at is, is my thesis still on track? And so this week, not only did we get a production update, which is great, They are making satellites. I know some people say they're not making them fast enough, but they are making them. And that's a hell of a lot better than not making them, which the bear case was they are not going to make them and they're not going to work. So what we had this week was not only are they making them, but they work. And so it was nice to see the 2 Degrees Mobile test again, third-party validation with a partner, which is the ASTS way. ASTS does not do the photo shoots of ASTS members in a parking lot, which might have cell phone service from a tower nearby. Going like, oh man, it works awesome. Give us money. No, ASTS every single time, as Tut once pointed out, always has the customer showing a demonstration of the product. Why is that? The customer is very, very unlikely to lie. Why would they? So here we have the CEO of Two Degrees. Talking in a wonderful New Zealand accent. What an accent. I mean, to be born as a New Zealander, to be handsome and have an accent like that, I just can't even imagine what it would be like just to like walk into an American bar and drop that beautiful accent. But they dropped that beautiful accent while showing D2C capabilities, which I would argue is even sexier than flexing that accent at a bar. And so they show that you can communicate anywhere. They're showing off their new ground station, which is the necessary infrastructure, notably is the necessary infrastructure to provide data sovereignty. So New Zealand, beautiful country, I was very blessed to be able to go there, is not going to have to worry about its data being shot over to the US. It's going to have full control. And then they showed Video calls. They did not show a picture of a garbled text message, which is a trust me bro type of thing from SpaceX. That's a real big difference. And so the customers are excited about this. They're excited because it's a great product. Every day we get another example of how this product saves lives. But the reality is this product is going to make life better. Today I was at the beach and my wife said she had called me multiple times. I didn't answer. She was just thinking I didn't answer because I didn't want to answer, which generally could also be true, but didn't answer because I didn't have cell phone service. And so she was calling relentlessly, like, is you know our son okay? What are you doing? And I'm you know I didn't have my watch, didn't have service. And so all the time people have these low coverage zones, and it impacts being in touch with loved ones. It impacts husbands' ability to have excuses of like, oh no, my phone didn't work, and. then I bask in my own freedom. And the MNOs of today are dead set on taking away the last excuses that men have to have plausible deniability of not picking up the phone from their wife when they don't wanna come home and don't wanna disrupt whatever they're doing. And so the MNOs have found the last pathway to make sure men have no valid excuses. And I'm sad to say I had a part in this. But you know, if I didn't do it, someone else was going to do it. And then we have to understand, going to this point, that it's not just about this binary of to ASTS or not, to have a satellite or not. It's about the hybrid network architecture. And so Katzi, who I will point out, if he does win his election, he pointed out he wasn't posting as much because some election stuff. I think a lot of us is. Have been planning on how we can get him impeached if he wins, because it turns out when he's not posting, the stock price plummets. And so there might be some leaked videos coming out or some rumors that are salacious that maybe can get in the way of his election. But if he does win, I think we have to unify and get him impeached. I don't know what he's running for. I actually don't know who he is, but that means we'll probably just have to impeach everyone in Sweden knowing that we will get one of them. And then Catseye will have to post more and our stock will go up. But he did take a break from whatever he was doing and put some cool graphics up that show what happens when you have towers only. So, shocker, the strength of the signal is really high around the station and then drops off precipitously. A satellite covers everything with less of a peak, still some peak around the edge. The signal of the beam is lower than in the middle, 90 degrees strongest. But then when you pair a tower and a satellite beam, you really push up the quality of the coverage everywhere. And this is what's so exciting to the MNOs. It's about massively improving their overall service so they can deploy spectrum really efficiently. And so then, as Anpanman points out, the 1-bar gray zones account for 25% to 30% of MNO terrestrial coverage. So that's an enormous amount of TAM. And so someone that's new to this would, like I did, would go and pull the data from the FCC readily available and look at what the coverage is. And so you would say, oh my God, 99% of the population is already covered by existing networks. And then you would dig a little deeper and go, well, hmm, how much of that is 5G? But then you would also ask yourself, well, yeah, the population where they live, but then what about geographic coverage? These numbers change a little bit. But then if you start to think about what is the one bar coverage, then all of a sudden going from oh there's only a one percent opportunity pretty small TAM to thirty percent you start cooking with gasoline and that's why you're seeing the MNOs that are so excited. So with this technology, one would expect the spectrum to follow. So Deutsche Bank this week also was arriving at the same conclusion that the space mob had. which is that Grains Management's 800 MHz spectrum, which is a 7x7 swath of low-band spectrum, is something that ASTS would be really interested in. And they're arriving at the same conclusion as well, that ASTS is highly unlikely to buy it for cash upfront, but more likely than not to use a structure like what they did with Legato. In other words, people that are gleefully predicting that there's going to be some sloppy equity raise by ASTS to buy this spectrum, are more likely than not to be very disappointed when that doesn't happen. And so I still think that there's a very high likelihood that this deal is done with the JV. So the JV, the MNO JV, might actually be the counterparty that takes the spectrum, and then the spectrum is conveyed to ASTS. But we'll all find out. But that would be a capital-efficient way to do it. So then we just go back to, well, Kuk, all these great things are happening. Why are you such a dipshit that talk about a stock that goes down every week? Why don't you talk about stocks that go up? And you know, honestly, I wish I knew the answer to that. But when we look at these charts, it's crazy. They're all the same. And so I was looking at this one post by @Wave3Trades, and it's a it's the charts of ASTS, Rocket Lab, Redwire, and PL Planet Lab, and they're all the same. They're all this descending wedge thing. You know, who knows how these resolve? I threw an AI too, and I forget the answer. I think it said like, oh, that might be moderately bullish, but I don't know. AI and TA have certainly not been reliable. If it were that simple, could you imagine just throwing a chart into Claude and say buy or sell, and you could get rich that way? But I don't think that works. And so to me, it's all about looking through the front mirror. And so we had some sell-side research come out, Clear Street, this week, and looking at their forecasts are interesting. going to be wrong by a mile. And so whenever you look at sell-side research on a company like this, they put their pants on one leg at a time too. This is a company where it would be enormously impossible— enormously impossible is kind of incoherent English, but it is impossible to accurately predict the revenue of a company like ASTS from the outside because there's just too many variables. But you can get the general sort of path. And so Clear Street believes that this company could have $7 billion of revenue by 2034. That to me seems very low, but you can very quickly see how fast this can scale, and that's what we're playing for. And so one way I think about it is forecast out, again, loosely what quantum of revenue you might be thinking. I personally think tens of billions of dollars makes sense, but just say it's $10 billion. Again, I don't think that's a lowball, but I do think they're going to be able to smash that. And then just go, well, where do I own the company today? Do I own the company at a multiple that just seems too low? If yes, then that can kind of be the end of your analysis. You just kind of know that it's going to go up a lot. And so for example, if you had conviction that this is going to be $10 billion of revenue and then you know you own this at 2 times revenue, well, AT&T trades— where's AT&T trade? I think AT&T trades at 4 times or something. Just pulling this up. It trades at FAA.
[00:30:14] Speaker A: Hold on.
[00:30:15] Speaker C: Getting slower at Bloomberg by the day. EEA, I forget these codes. I'm no Anpanman. Let me just look at this. I think it trades at like 3 times revenue. Yeah, 2.6. So what's the probability of a high-growth company with defensive moats trading cheap to AT&T? Seems pretty low to me. So then you know it's probably going to go up. And the same type of analysis, what I wish I had been smarter at is things like Google. And so when I first looked at Google in 2004, if you had just taken sort of a machete with your estimates and really kind of understood the realm of the possible, you would've been laughed out of the room, but you would've concluded you were buying it at like 0.001 times earnings. You would've just ended your analysis there knowing that you had built in a lot of buffer. on your thesis and you would just sit back and relax. Now, nothing is easy. Google was anything but obvious back then to Wall Street, which is why people didn't own it. And ASTS could be anything but obvious to people because they could very quickly just go, well, what about SpaceX, all these things? But a lot of us have concluded that this company has a real commercial advantage because of the way the M&Os are going to act. A lot of us believe that it's very unlikely SpaceX is going to be able to take out all the M&Os. Therefore, you can start to get a lot of confidence in some of these revenue figures. And if you believe this is a company that could do tens of billions of dollars, that's where you can start to realize, hey, maybe this investment really could go up 10 to 20x, which is certainly my view. And that's really why it's important to always be looking through the forward windshield. And just to speak to the TAM, The irony of Gwen Shotwell getting up in front of everyone saying that she installed a Starlink on her car after poor cellular coverage on her way from her house to her workplace really just underscores how big this market is. She's not using Starlink's D2C. She's strapping a terminal on a car, which I had made a meme a while ago. Again, people know I'm a Porsche guy. ends up replacing the wing of a GT3 RS with a Starlink dish, talk about something that would make Ferdinand Porsche roll over in his grave, but you got to do what you got to do. You got to make use of that wing, I guess, for connectivity. But there's a lot of people that have these commutes, for example, Gwen being one of them, that are going to be really excited when their phone always has a signal. It just goes to the size of the market. And very quickly, people are going to have an expectation of this. In a couple years, I firmly believe that no one will really ever complain about dead spots again, and it will just not be a thing. And it will be like magic, as they say, when this technology is out. So getting that technology out is really just about debottlenecking the plant and getting these satellites up. So the next slide we have here on the Twitter thread is debottlenecking the plant. And you can just see my tally, it just shows what they've delivered and what the WIP is, the work in progress. We just took another jump up in terms of the work in progress. So now they're working on satellites through 48, and we're about to get a big ship— shipment out, another 3, have that jump up. And this is going to continue to be the trend, and we'll ultimately find out just how many satellites in WIP they have, what actually represents full throughput. They've continued to add to that. So we actually don't know really how many satellites deep are in the assembly line. I imagine at some point that taps out, which is no big deal. We just really then want the output, the shipments to really accelerate so that that's held constant and they're moving through the factory. But then we also have to think about launch capacity. And so again, Everyone wants to add launch capacity. SpaceX has really lit the fuse under both competitors, but also other nations to really catch up and to have more of a credible challenge to SpaceX. So Japan seeks more H3 rocket launches, quote, to chase SpaceX. And so then they wanna lift the frequency to between 6 to 8 launches per year. We don't think that this is necessarily a coincidence related to what's happening with JLEO. And I really hope that we do launch out of Japan. I selfishly just want to buy the rocket for my collection, and I want to go there for the launch. I think that'd be really cool to celebrate with with some new Japanese friends. But then we also have Blue Origin still cranky, and the type of thing that I would have said back in May and June is, you know, wow! First of all, holy crap! That was dramatic and terrible and not good. But we're gonna blink, and before you know it, they're gonna be back on the pad. And so here we go. Blink. It's already been three months. It's almost it's almost September. We're gonna blink again. It's gonna be December, and they're potentially gonna be on the pad. And you can see David Lim keeping us updated. They're they're pressing. And it just goes to show you how easy it is to freak out and not really appreciate just how fast time passes. You know, when they say life's life's short, you know, it's unfortunately very true. And you blink, and so much time passes. It's already, you know, summer is already is already over, and you know, Blue Origin's almost back to the pad. We're gonna blink. We're gonna have 45 satellites up in orbit. All the people worrying about, you know, a little bit of a delay of batch three and things like that, blink already passed. And the, you know, I'll say it again. It's one thing to say, hey, blink time passes. You know. Thanks, Cook. You're super smart to identify the fact that Father Time always wins. And I know that's why I have so many subscribers to my Substack. Please join. But what's imperative and embedded in that comment is that the ultimate thing that we're waiting for is value creation. A lot of companies can advance the ball down the line, but what they're doing fundamentally is not smart. So I believe that this company has a good product, a good market with good economics, That remains to be proven out. And then the passage of time leads to value creation for us. The other thing on launch we learned this week, and I think we're waiting for this to be totally, totally confirmed, but SpaceX is now done launching Starlink cargoes from the Cape and is now moving them out of Vandenberg, which is now freeing up, apparently, a lot of F9 capacity out of Florida for commercial third-party launches. So wouldn't that be a funny little twist? And so for a market that just assumed that ASTS couldn't get any launch capacity, there now might be a lot of excess F9 capacity. Again, I don't know if that is totally right, so I'm going to be staying tuned and relying on some of my trusted research partners to help validate that for me, but that's what we're seeing and just passing that along. And that's exciting. First of all, it's very convenient for us to go to the Cape for launch. So I hope it's true. And I think all of us really appreciate the consistency of SpaceX. And a lot of us really hope that we do launch with them a lot. So that would be good news. Next, we have data centers in space. So this is where people go, hey, Cook, read the room. We're not in the mood for data centers in space. Can you just make the stock price go to $75 so we can all sell and never talk to you anymore? I get it, I get it. But it's important to be focused on the big picture here and understand what type of things can happen. When you were to have— I wasn't really following Nvidia that carefully, but I could only imagine that in some random market downdraft, a lot of people were just thinking like, okay, Jensen, we don't care about this AI stuff, you know, what's going on with gaming and your crypto ASIC? And he'd be going, no, no, trust me, like, you, you want to like learn about this AI stuff. And people went, you know, read the room, buddy. Just, we're worried about next quarter. And so here, the data centers in space thing is something that I'm still keeping a close eye on because it does seem to me that this is going to burst into the mainframe of conversation at some point, maybe sooner than we think. And so at first there's disbelief, but slowly the market can wrap its head around something and then you find yourself going, but I knew that. Why did people not care about it back then and now they do? I thought it was obvious, but then it became less obvious because people didn't agree with me, but now they do agree with me, so I guess it's obvious again. That's sort of the ebb and flow I've seen in my career. And I do take careful note when Adam Jonas of Morgan Stanley gloms onto something. This is a guy who I know. He's a big thinker. and he's kind of bored. So he sits at his office in Times Square and he's looking for big ideas because this is a guy that could probably retire. He's a very senior guy at Morgan Stanley. He could really ride his ticket and do whatever he wants. He just wants to find the next big things. This is what gets this guy going, and he's a great thinker. He really has separated himself, in my view, on Wall Street as being one of the big the big thinkers. He'd be a great venture capitalist. And so he thinks that data centers will go to orbit, and he's doing the comparison with terrestrial logistics, and it's a lot of stuff that we've been working on. And at the same time, you're starting to see capital flow there. And so we had a fundraising with StarCloud, which I believe is putting Nvidia chips in orbit. Uh, they just raised quarter of a billion dollars, which is no joke. That's a lot of money at a $2.3 billion valuation with a whole slew of strategics. So Nvidia, Cisco, who else do they have in there? Benchmark. These are real guys. EQT, that's real. So many things can be said about VCs. I will say this as someone who gets inside baseball, So I don't want to say that you generally assume that they're always right. They don't always do a lot of work. Sometimes they do, sometimes they don't. But it is a coincident indicator that they're at least seeing enough to get a quarter of a billion dollars out the door. And it's almost surely the case that they're relying heavily on the strategic partners that are also doing the fundraise here. And so those people probably also have a very good idea as well about the validity of that market, and they're saying yes. So another confirmatory thing. And then as we had one person point out, ASTS announced that they were on satellite 48. And Abel on the quarterly call said, we're starting to add compute capability on satellites 47 and 48. So presumably, unless that's changed, ASTS has now started production of those very same satellites. Edge computing is coming to ASTS. And so think about the head start that we likely have on most any other company that might try to pursue this opportunity. The embedded optionality on top of our core business related to this strikes me as non-zero. I'm particularly excited about it. I'm particularly excited to see it develop, and it's entirely possible that the thesis could pivot where this could end up being the bigger opportunity. That's certainly not my base case right now, but it's something that could very easily happen because we've seen the scale of demand for AI compute. And so it's a very interesting thing to see develop, and I believe that we have a team that can prosecute against that vision. Meanwhile, I thought one of the coolest things I saw this week was this Nomad Bet slide that just showed market cap of satellite companies over the past couple years. And you can just see that SpaceX just basically took everything, and then you had EchoStar pop up, but that was just because that's SpaceX stock. And then you had some revaluation, a lot of these just from spectrum value, which is really market cap attributable to ASTS and SpaceX as well, because ASTS basically proved the value of all this other S-band. And so it just shows that these other companies really had their management teams looking in the rearview, kind of not seeing disruption that was coming, started to play capital structure games, and financial engineering, but didn't invest for the future and didn't disrupt their own businesses. And so this is the innovator's dilemma.
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[00:44:20] Speaker C: And they were disrupted. And the new kids then came on with big visions and seemingly have eaten all their lunch or has just basically rendered all of them as on the chop shop being sold for parts, and the sold for parts are really just the spectrum. So it's just really interesting watching these dinosaur companies get a comeuppance, and we've seen this movie before. So the difference when we think about big tech in general is the tech leaders in the 1990s, like all the on-prem guys like Computer Associates, things like that, these guys were definitely victimized By the innovator's dilemma, they had these high cash flows, these business models that had different attributes. They saw the SaaS guys come along, and they were like, "Well, do these business models even work?" They would have read Wall Street research saying, "Hey, SaaS loses all this money." People weren't really thinking about how the accounting worked, and then they just got totally disrupted. Now fast forward, the Mag Seven platform companies of today—they're no dopes. They are on. constant alert for potential disruption. And so they're fast on the trigger to pivot into new markets and to acquire to stay on top of it. So it's very difficult now for software companies to really get the jump on the big guys. I mean, notable exception, you have like OpenAI obviously has done pretty well and Anthropic. And so you could argue that the big guys actually weren't totally on top of AI except for Except for Google, but the big guys are generally pretty on top of it. Are going to put up a big time fight. Satellite companies give me a break. I mean, we've seen these CEOs on these panels. This is like lazy London tea time. These guys are comfortable. They get to wear their fancy suits. They're on Regent Street at Café Royale talking about European satellite TV, blah blah blah, and. hiring consultants to try to sabotage ASTS because that was disrupting the status quo. And then Starlink just comes and proves a satellite model at a scale that no one had previously comprehended. And it's crazy. It's just total disruption of an industry. And so you always have to be looking over your shoulder if you're in any industry. And what I like about ASTS is I feel like these guys are, So they're looking at new opportunities, they're staying ahead of it, they're having, from what I can tell, a really good vision on how to not have tech debt so that their technology is relevant, low friction, and usable, whereas a lot of other companies, notably Starlink, is not those things. It's just interesting to think about the innovator's dilemma and where opportunity can arise in industries that look like they're well saturated by incumbents, but are those incumbents playing intelligently. SpaceX is hoping that the MNO incumbents are the dinosaurs that are not looking over their shoulder. SpaceX continues to rattle the cage, thinking about if it's going to be an MNO. They are potentially buying more spectrum. We saw that on, I think it was Friday, SpaceX is acquiring TriStar's uplink licensing. This pairs well with the EchoStar spectrum that they bought. And, you know, this, this is still something people are talking about, um, whether SpaceX can have different approaches by using its core Starlink business to help provide terrestrial connectivity or using smart small cells. Of course, there's all sorts of people saying that this is either smart or not smart. There was an article In light reading this week, we're one expert. So I always want to take you know appropriate humility of it's easy for me to say, "Hey, don't listen to the experts on ASTS," but then turn around and quote another expert who then says, "Well, Starlink is doomed," and then say, "Well, look, that guy says Starlink's doomed. Don't worry. I appreciate that." I can't have it both ways. But let's just look at what this expert said. His name is Earl Lum, and he's an analyst at. Earl Lum Wireless Research. I have no idea who this individual is, but his comment is worthy of just saying because it's funny. This ranks as one of the top 3 dumbest ideas in my 4 decades of being in this industry. And he's referring to SpaceX's plan. What's currently unclear is SpaceX's precise definition of a small cell, but a typical outdoor small cell would come with a power output of 5 watts per channel and be difficult to install in residential properties. And so I guess we just let these cards flip as they're going to, but Starlink going to compete with companies that have a 50-year head start of depreciated capital, in particular, all the towers that are up, own all the customers, things like that, just strikes me as difficult to imagine that a newcomer could come and do this. in a market that fundamentally doesn't have a lot of growth and have good returns. So my baseline belief as to why Starlink won't do this is they're a return-on-asset-focused company. They're not just going to do it to do it and realize a 4% return on assets. That just doesn't make sense to me. And I don't think it's going to make sense to them. So that's why I believe it's all just negotiating posture to try to get an MVNO deal with T-Mobile, which I don't think they're going to do. And that then yields a different outcome for ASTS where Starlink is boxed out. We get all the MNOs, we get a huge amount of revenue, plus all of our government stuff. And that's then ultimately the bridge to the tens of billions of dollars of revenue, which is far higher than what we would've ever contemplated back in 2024. when it looked like we just had exclusivity with AT&T, but we could underwrite to a big enough outcome on that alone. So that's what we have this week. If you're feeling like you have low sentiment, just know that you're not alone. If you feel like you want to give up and sell, no one's stopping you. You'll probably feel great when you do it. It'll probably be a huge relief. You'll probably thank me and go, thank God I listened to Kooke. And he told me to sell, but I'm not doing it because I think it's still this massive market unwind, which I'll actually talk about a little bit. So when I was talking to Tanner, you know, it's bad when Tanner calls you. It's like, oh no, Tanner's feeling lonely. And so Tanner called me this week and he was like, Kooch, how are you doing? Which I'm like, how are you doing? Because I knew he was hurting inside. And so we're talking about the, you know, the market. And I told him, like, I don't know if this is right, but let's just, let's just think about what happened. So Situational Awareness had $100 billion of long AI. It's basically what this guy's portfolio was. On his long book, he was long AI. On his short book, he was short companies that were short AI, which makes him long AI. So it's long AI and long AI. That's a ton of factor risk that was in the market. So then as he was spiraling out of control, everyone was dominoing and getting knocked out by this kook, and then Citadel bought the book. So that wasn't the end of it. That was just a broken dam turning into a controlled release dam. Citadel is not in the business of owning $100 billion of long AI directional risk. It's not how they roll. They're about alpha and factor-neutral returns. So for them, the alpha was buying that book 10% cheap to market after it had already been obliterated. Ken made his money on the buy, and then his exercise was to liquidate that book effectively, which he's in a very unique position to do because of Citadel Securities and a team of incredible PMs that were likely putting on hedges immediately to manage that risk. And then they've been out in public talking about how they've been selling down that risk and they're almost done. So as I thought about this, as Tanner was pillow talking with me, I thought, well, okay, hold on. So you have this massive transfer of risk. Everyone in the world is knowing what's going on in terms of the big desks. And so it's a little bit of a standoff. Are you going to really step in front of the unwind of this thing or are you going to wait, especially in the middle of August? People are at the beach. For people that didn't work on Wall Street, they might just be like, what are you talking about? If you're a portfolio manager, you're probably living in New York, or nowadays, maybe you're living in Florida, but the result is the same. You are getting out of these places. They are super hot and humid and miserable in August. I always stayed because I'm a glutton for pain, but most people— there's a reason why traffic in the Hamptons is awful. It's because you take the island of Manhattan and you put everyone on the east end of Long Island, which is like colonial-era infrastructure. And so all of these people, their priority changes from managing risk in their portfolio to figuring out if they can get into like the pop-up SoulCycle class at Gurney's. That's kind of like how priorities shift for people. And so, and God bless them because they need a break. And so you have then generally this liquidity vortex of people going away, and this is the last big hurrah before Labor Day. So then on the other side of stuff, are you going to— you kind of have this abeyance of risk. It's, it's working its way through. Citadel's blowing out of it. The market makers then also don't really want this to be a particularly volatile period. They just kind of want people to chill out. And so I don't know how they do this, but it just seems like an uncanny coincidence that vol collapsed. So what happens when vol collapses? Deltas go down. High vol, deltas on options are higher. Deltas go down, gamma goes down, jump risk goes down. There's just less craziness. And so if all of a sudden the Street is trying to puke out this massive book sensitive to vol relative to where they bought it, vol collapsing kind of makes sense as to the desired outcome. And so then in a week, and this kind of can be pulled forward because there's a little bit of front-running, but as I think about this, in a week, you're going to have probably the rest of this book blown out. People are back at work, recharged or equally exhausted because they just spent a week with their children on the beach trying to make sure they don't get caught in a riptide. Then the market makers then probably want to get back in the business of selling vol, get some juicy premiums by selling options to retail. Then that would be all of a sudden when they're out of this situational awareness book, and again, I don't think it's just about the $100 billion because All of a sudden, if people know that risk is moving through the system, that $100 billion could end up acting like a trillion because other people are going to act as if they are Citadel because they don't want to get run over by Citadel. So whatever the right multiplier is, I don't know, but $100 billion is a lot of money, and because other people are aware of what's going on, it could act multiples times bigger, Which to me kind of explains why stuff is trading like absolute death and why vol has collapsed and just how quickly that could turn around. And so that's what gets me hopeful. Hope is my greatest weapon and weakness, but I wouldn't be surprised if in a week or two, all of a sudden we just start to see vol coming back. And so implied vol is what I'm really focused on. That could really just make things start to feel a little bit more normal because right now, when I looked at it, let me just actually look at it right now, a very uncanny thing is happening right now. Anyone with a Bloomberg, you go to ASTS equity HVG, historical volatility, and then you click the IVOL button, and you'll see this stock is realizing in the past 30 days, 86 vol. In the past 10 days since, um, you know, if we actually look— let me see when we want to look. If we look at the past 10 days, the stock has been realizing 73 vol. Implied volatility really collapsed back in August, but then really before that, the first big leg down was June 11th. It went from implied vol of 126 to 100, where it chilled out and then just totally, totally dumped. And that just seems really unusual. And in Panman, as we've been trading the stock over the years, we've really noticed that whenever vol just dies, it's really a concurrent reflection of sentiment as well. It just really means that retail has also just quit betting. Everyone's left the casino. which means that when the casino is empty, it can only go one way. People come back in. And you have this— I think this Momo factor is this sort of Mexican standoff with Citadel in the market. It's August. It's a lot of these things are happening at the same time. So I'm able to convince myself that there's light at the end of the tunnel, but my ability to predict security prices in the short term is Really legendarily zero, but that's kind of that's kind of I'm thinking about this to the extent anyone cares. It's kind of an operating theory, but when when Tanner called me to check on himself, using me as a reflection of his own psychology, that's sort of as I talked out loud. That's what kind of made sense to me as I kind of explained it back to him on the fly. So that's what I got. Hope everyone has a wonderful week. Just remember to cherish your family. I just had a friend lost lost a child, which is really I can't even mentally process it. It's just a horror of horrors. You know, truly the worst thing could happen to you more so than your own death. So hope everyone just keeps perspective too. If you're on this call, it means you're alive, and so that's good. It's a good starting point for your week is to be alive. So with that uplifting message that you are alive. I hope everyone has a great rest of the weekend, and I hope everyone remains alive so that you can join me next Sunday for an update on our favorite stock. So stay alive, be grateful, and be careful of riptides. That's my other advice. And get a colonoscopy. So I'm full of lots of public service announcements, but I would also just say colonoscopies are really not that bad. The prep was awful, and I thought I was going to throw up. The second time I drank whatever concoction make you drink, but just remember the the anesthetic is is worth it. It's like the best nap of your life, and you have no idea what's going on. So take care of yourself. Colon cancer cancer seems to be pretty treatable if you're on top of it. And so I'm trying to be this generation's Katie Couric and bring attention to this, even though I know that Anpanman's done the same. Have a good one. Bye. 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 Space Mobile, make sure to subscribe. Thanks again, and I'll see you next time. Listen, waffles.
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