AST SpaceMobile: Amazon Files for 5,000 Satellites

[00:00:00] Speaker A: My hedge fund boss had told me, until you've lost a painful amount of money, you can never be a good investor. If anyone wants to work with Viasat, they would have to do so without the US market, which is the most profitable market for mobile broadband. 25 to 35% of terrestrial coverage is serviced by only one bar. Hey everyone, thanks for joining on short notice. I figured I'd start up the space today because there is a number of items that I wanted to cover. And so, yeah, thanks everyone for joining. I know it's been a pretty rough time. That's an understatement in the market. And I would say from a mental perspective, it's probably one of the harder periods of, I guess, in the last day or two that I've kind of been through, or not one of the harder periods, but it's been hard. Because I think, you know, our recent friend Jacob, who lost a lot of money in his account, that was very unfortunate. And I'll talk a little bit about that. But yeah, just personally, I know Jacob and he's a great guy, you know, bright, smart, and I think got carried away in terms of not investing but gambling. on options. And as a result, unfortunately, he suffered a catastrophic loss in his account. And I think, you know, I'll talk more about it later, but one of the things that, you know, when you have that type of tendency under no amount of caution or advice, sometimes people unfortunately have to go through something like that. in order to learn and move on. And it's something that I've referred to in the past as, you know, my, my first hedge fund boss had told me, until you've lost a painful amount of money, uh, you can never be a good investor. And it's just unfortunately one of the things that, um, people have to go through. And I, I certainly have gone through that myself, uh, in my investing career and personal investing. But, um, hopefully it's something that people can avoid because, or at least learn lessons, which I think we're seeing quite a few of those with this most recent market downturn. But anyway, I did want to cover a few topics. The first is this Amazon FCC filing. For those that haven't seen it, there's a few people that posted about it. Amazon filed with the FCC a direct-to-device constellation of over 5,000 satellites. And I think some people would ask questions about what this constellation is and what the impact is for AST. I would just note that this is right now a placeholder for Amazon. As I've mentioned before, they have plans and have committed to deploying the Globalstar replenishment satellites, which MDA Space is currently building. That's been delayed. And then they are putting out the next batch of constellation based off of the Aurora satellites from DA Space, which I think is around 50 satellites. And then today we found out that they have filed with the FCC a plan to deploy 5,000 plus, just over 5,000 satellites for direct-to-device service. The spectrum that they'll be using is the existing Globalstar spectrum here in the US, and then they kind of Filed more broadly covering L and S band spectrum in addition to what they have outside of the U.S., and they specifically didn't ask for supplemental coverage from space because that Global Star spectrum is already used for satellite to device MSS. You know, it's already approved for that that use case, which currently Apple phones use. But but yeah, this is pretty common where you have. Companies that will file a large constellation as a placeholder and start the regulatory process. And so for Amazon in particular, this is for them to essentially preserve their spectrum rights here in the US and then abroad as well. This is something that you would expect them to do. And by demonstrating that, in particular in this filing, that they are using the existing Globalstar constellation, they're going to roll out The replenishment satellites, and then the next generation, and then this future constellation, which is 5,000 satellites. And they're saying it will operate, you know, it will operate in addition to the existing Globalstar constellation. The reason why they're doing that is they want to preserve their international spectrum rights. They also want to create this bridge from a regulatory perspective to make sure that they retain all of Globalstar's legacy constellation and expand on that. And so in this day and age where you have a number of players that are aggressively moving into the direct-to-device market, one of which is AST SpaceMobile, the other is SpaceX, and then you have a few other players as well. Amazon is putting a framework out there in order to talk to regulators globally in order to prep for the eventuality of a very large constellation. And so, you know, there are a few details in there. For example, that constellation will interestingly deploy an architecture that's similar to Starlink. So it's not going to be something that is similar to what AST is doing. It's going to focus on also mid-band spectrum as well. And so, you know, this is a placeholder. They can change it in the future. They can add more specificity to it. But I think the key thing is that this is expected. They need to file something. So it's important to understand when it comes to regulations in and around this area, you need to— it's almost like a land grab where you have to file and make sure you either preserve your position in line, which is what Globalstar has very good Global rights around spectrum, or you file something as soon as you can because there's a priority list of, you know, if a new player came out and wanted to launch a constellation, they can either file and get in line now, or they could try to acquire a position, which is what AST did in addition to, of course, acquiring the L-band spectrum from Legato. which those rights already exist here for the US and Canada. They also acquired a small company that had spectrum rights globally. I think they're number 4 in line or number 3, so pretty high up. And what that buys you is basically an ability to go to regulators in each of the countries and they give you priority to negotiate with them. And so we saw perhaps some of the fruits of the company's moves where they were able to get a 10 by 10 megahertz spectrum allocation in Brazil through Anatel for S-band. And so, yeah, those are my thoughts. I mean, I don't— there's no additional information from Amazon. I think Mega Constellations posted that perhaps this is a first move where Amazon could be interested in Viasat's ex-US spectrum. And so maybe there's like some type of deal to be had there, but I would point out that the US rights to that spectrum, the L-band spectrum, is actually owned by Legato. And of course, AST has the 80-year rights to that. And so in effect, it is a poison pill because if anyone wants to work with Viasat, they would have to do so without the US market, which is the most profitable market for mobile broadband, right? And so interestingly, because of AST's Legato transaction, they hold the cards essentially to that. Spectrum globally because it's going to be pretty difficult from an economic perspective to deploy a constellation that serves all the other regions with the exception of the US. And so could Amazon do something with AST in the future? Yeah, they could. But the key question is what is Viasat going to do with their L-band spectrum outside of the US. And so the natural partner for ViaSat would be AST in order to deploy that spectrum. So whether that would be through a partnership or lease agreement, that could be possible. Or the alternative is for the AST side, because ViaSat is not really utilizing L-BAN in a wholesome fashion globally, AST could just go to regulators market by market and make a case as to why they should get that allocation. And so that could be a longer process, but more economically attractive process. And so that's another path. But yeah, this is all pretty interesting stuff. It's like Game of Thrones around each of these markets and how spectrum will be divvied up. You can either go acquire it, you can go through regulatory process, you can do partnerships, leases, things like that. So it'll be interesting to see how this all plays out. But so yeah, so long story short, Amazon is putting a placeholder down, preserving their rights. I pointed out to someone earlier today, you know, Astra, the failed launch company, if you guys recall in 2021, they filed for a 10,000 satellite, 10,000 fixed wireless broadband satellite constellation. I think it was in, yeah, 2021. And of course that did not come to fruition. But for any of these companies, if you have any inkling or potential of putting up a constellation, you should file, right? So for example, with Rocket Lab and Iridium, I would expect them over the next few months to eventually file a, um, you know, an FCC, um, with the FCC for a future constellation that will have, you know, you pick the number. You typically want to pick more than less, but maybe 5,000 satellites or 4,000 satellites for, uh, direct-to-device coverage, right? And so that would be something that you would expect, uh, Rocket Lab to do to preserve their rights, um, for their spectrum and to show regulators that they are Not only sitting on what they have now, but they have plans to update and refresh the constellation with something new. So, so yeah, that's pretty much expected. Let's see, moving on. So I did want to talk about, let's see, there's a few topics here. Let's, let's talk about mid-band and C-band spectrum. And so I did a post earlier today, which was inspired by another Smith. He had shared an article, I think from 2007, talking about the cost of deploying 700 MHz spectrum versus mid-band and C-band spectrum. And so there were some pretty interesting statistics in there. I think one of which is the cost to deploy C-band, right? And so what is C-band? C-band is upper-end spectrum for cellular use, call it 3.5 GHz, which AT&T owns a big chunk of that. to as high as 4.1 gigahertz. I think Verizon owns a pretty big chunk of 3.9. Interestingly, T-Mobile doesn't own any C-band spectrum. Because they bought Sprint, which had acquired Clearwire years before, they own a really hefty amount of 2.5 to 2.6 spectrum. And so they haven't bought any C-band spectrum. However, this spectrum is interesting in that if you use AT&T for if you get 5G+ wideband service, or for Verizon, it's called 5G UW, ultra-wide. This is the spectrum that they use in dense urban areas where they overlay on top of their existing network, and that spectrum gives them a lot more capacity. And so the reason why C-band is interesting right now is that the FCC is auctioning off another 160 megahertz of C-band. So 3.98 gigahertz to 4.14 gigahertz. And so I think that's supposed to be auctioned in the coming months and will end sometime in July 2027. And so that's 160 megahertz of spectrum that's coming to market. Previously, the FCC had auctioned off 280 megahertz of C-band spectrum on the low, I guess, lower C-band, which was 3.7 to This was an auction that completed in early 2021, and the gross proceeds for that was $81 billion. But the reason why I bring this up is that this is interesting spectrum. It doesn't have great propagation, but it can carry a lot of data. And I'd note that in my post, when I had met with Abel and had our first conversation in early 2021, he had talked about The low-band constellation, the mid-band constellation, and then the C-band constellation. And back then, I didn't really understand the implications of that. I know, for example, for low-band, I understood well because I understand cellular spectrum. And he was telling me these stats that, well, we can create 2,800 spot beams, cells with low-band. And for mid-band, we can create, for one satellite, it would be 10,000. cells. And then you didn't specify what that would be for C-band, but it's surely going to be well north of 10,000 cells for each satellite. But the interesting thing about this spectrum is that obviously the carriers are using it for data, for dense urban environments, and it's good at that, but it's not good at propagation. So it doesn't go through buildings very well. It's not something that you would use for coverage, which is what 600, 700, 800 megahertz is. But with the additional spectrum that's coming to market on top of what's already being used, when AST eventually does deploy the— well, also when it deploys the Block 3 satellites, which cover mid-band, but then the Block 4 satellites, which will cover C-band, it's interesting to note, and this is based off the discussion today, Which is what kind of caused me to think about this, is that when you look at an equal site of coverage for 700 MHz, you need 1 cell tower. For 1900 MHz, you need about 3 cell towers. And then for C-band, you need about 7, right? And so the cost to actually deploy this spectrum is really high. And so I think it, just like we see today, The deployment is going to be focused on very dense urban areas. However, for the carriers who purchase this spectrum, whether it's mid-band or C-band, the ability to get deployed via satellite is going to be very attractive, right? Because you don't have to build towers, you can just beam down service from a satellite and provide additional capacity, whether that's in mid-band, but also for C-band. And so Interestingly, if you look at the statistics, a nationwide deployment of low-band spectrum costs anywhere between, call it, $12 to $20 billion. And then for mid-band, that's $20 to $35 billion. And the biggest change of that cost is you have to put more towers, right? And then for C-band, it's more like $35 to $60 billion. So it steps up pretty significantly. However, as my post had said, I think the vast majority of C-band deployment and mid-band for that matter is going to be from satellite, right? Because outside of the dense urban areas, if— and these carriers, they've invested a lot of money into this spectrum, and yet in most of the US, it's not being used. By deploying it over satellite, that's the most efficient And cost-effective way to light up that spectrum. And so I think over, you know, once satellite coverage becomes ubiquitous and we get the first constellation up, then when you layer in Block 3 satellites for mid-band and Block 4 satellites for C-band, that by the way is an overlay, right? So you're going to have the ability to move from 200 megabits per cell to Probably something well north of a gigabit, right? And so that's where the numbers become interesting. That's where the potential of terrestrial network replacement comes into play, right? And so I'm going to go back to what, you know, AT&T's John Stenke said last week. He said very specifically, this is the first time, you know, one of the executives from any of the big 3 had said this, but he was saying that One of the opportunities is CapEx savings, right? Where for these areas that are uneconomic, where you don't need to build, where towers may be not properly used, then we might actually decommission those and just use satellite as a coverage layer. But then beyond that, if you then deploy mid-band and C-band spectrum, it's not just a matter of coverage layer, but you would actually get performance That rivals terrestrial networks. Now, obviously, if you get more and more people in that cell site, then performance goes down. But that's where the densification of the constellation comes into play, where if you have multiple satellites overhead and it's serving the same cell, then that becomes not as much of an issue. But anyway, it is something of interest. I think something related to that as well is the 1-bar signal opportunity. And so J.R. Wilson, I'm not sure if I covered this in the space, but Jared Wilson recently talked about how they view— and Jared Wilson, for those that don't know, he's a long-tenured, seasoned, tenured executive at AT&T. He left a year ago. Was it a year ago? Yeah, a year ago to join AST SpaceMobile. And in particular, he's talked about the opportunity of putting aside dead spots, the terrestrial network where there are 1 bar of coverage from local towers, that would be based off the technology that they're working on with AST and AT&T, for example, that you could see a situation where satellite would provide coverage where terrestrial signals are not strong enough to provide a decent amount of service. And so When, you know, that sounds like an interesting concept and it's like, well, how many, how much of the market is actually covered by 1 bar of service? You know, just based off of, you know, AI looking at research, apparently it's really big. It's 25 to 35% of terrestrial coverage is serviced by only 1 bar. And so I don't have to tell you guys, like most people have experienced 1 bar of coverage where it's pretty much worthless, right? You might get some narrowband data. And the key thing, of course, is most of the time you're able to do a voice call. So from a safety perspective, you can at least get by. But I think for a lot of folks who experience 1 bar, for all intents and purposes, it's like a little graphic that shows up on your phone, but you're not really getting service. And so that's where the potential opportunity is for The big TAM opportunity is for direct-to-device. And I think it's important to note, I've talked about this a number of times, but from a marketing and communication of message perspective for these MNOs, they're not incentivized to tell you that their service and coverage sucks, right? Like the first thing they're going to tell you before they pitch you satellite is say, well, we cover 99% of the market or 97% of the market. but what they mean by that is they cover 97 to 99% of the market of where people are expected to be, right? And so that means like at work or it means at home. But from a geographic perspective, they actually only cover, call it 75 to 80% of the land in the US, right? But then out of that, going back to the 96, 99, if you assume that, let's say, 1-bar service is 25% of that. If you add 25% to, let's say geographic coverage is actually only 75%. So sorry, if you subtract 25 from 75, then that kind of gets you to call it 50% of really good coverage, right? And so from a geographic perspective, and so if that's the case, then there's a pretty tremendous amount of opportunity for The satellite providers, AST included, to provide a more robust service in some of these areas that either have very weak connections and signals or no connections, right? And then on top of that, again, going back to the MNOs, if they see a tower that's deployed and there's only a few users on that tower at any given time, they may decide to just shut that tower down, right? And switch over to satellite. So I think in the future, obviously having terrestrial coverage will be important for dense urban areas, suburbs, you know, along highways. But then beyond that, you're going to see satellite more and more as either an augmentation or bolstering or complete replacement. So I think that's pretty interesting that, as I've mentioned before, you know, the market doesn't care right now, but when we eventually get to some firm footing, this stuff will start to, you know, people will start understanding it more. And obviously as service gets rolled out and we hear more from the MNOs of how service is being deployed and utilized, then I think that's, you're going to see more of a reflection of that in stock prices. Let's see. So moving on to the other topic, I did want to just briefly talk about hedge fund short sellers. And so one of the institutions that I talked to, there's a guy that works at this fund. He was telling me that he's been having this ongoing conversation with this well-known fund, one of the PMs there who's short AST. It's actually a hedge against their SpaceX long, which obviously both have not done well, but But the hedge has served its purpose in that AST has fallen while SpaceX has fallen. But in that conversation, it was interesting because this PM had no idea about the government business and that the company was making progress in terms of getting awards around Golden Dome and other SDA, the warfighter, proliferated warfighter, some of these other things. And so, you know, this person that I talked to is a friend, didn't pursue the conversation any further because I think he was more than happy to just let this guy, you know, exist in his ignorance, which I think a lot of short sellers on the institutional side probably are similar to this guy where if it's, if they're using ESD as a hedge, you know, they probably don't know what they're short. you know, I guess the flip side of know what you own. And I'll just say, you know, it is dangerous because I, when I was in the hedge fund industry and, you know, one of the key things is whether it was, if you were short something, you had to know it better than your longs, right? Because the amount of money that you can lose on short is infinite versus on long, you know, the worst thing that can happen is your stock goes to zero. But because of compounding, if they— if a short is— if you short something at a dollar and it rips and it goes up $3, then, you know, in essence you've lost your initial investment and you've lost 200% more, right? And so it's always, you know, dangerous. But one of the things that people are lazy about is if they hedge a basket, so maybe a basket of 4 or 5 names, then generally like they don't have to know the names as well because they're diversified. the short side. And so I think you probably, you know, for these SpaceX guys who are long, you probably have a— they're probably short a basket of space names, which, you know, for all intents and purposes, they've— it's done its job. It's done well. But when things do bottom and turn around, you know, that's where these guys can get hurt. But I just thought it was interesting that this guy in particular had no idea that AST has a government business. And quite candidly, looking at the stock price performance, I think the market doesn't know in general. I mean, it's not pricing much of that in, but it is what it is. Here we are. But I don't expect, you know, as long as the company continues to execute, I don't expect the stock to stay down here for much longer. But who knows in terms of, you know, the macro backdrop, are rates going to go up? Is the Iran conflict going to continue? You know, that those are some factors that could keep stock prices depressed, but we'll see. But let's see here. So moving on, talking, so I did want to talk about launch and time and launch timing. So interestingly, last year, Q2 earnings were on August 11th. And so I do think, you know, we'll probably follow a similar timeline. We'll probably have earnings sometime around the 10th or 11th. And so, um, I think the company had set— actually, let me just double-check that, what days that falls on. Yeah, so August 10th this year is Monday, and the company actually likes to report on Monday. So my guess is that that will be the day we report. And so that means, um, previously when the company had earnings on August 11th, um, they posted The earnings date on July 28th. And so my expectation is that we probably will get a PR about the earnings date either tomorrow or Tuesday, or at minimum by the end of this week, although that would be pretty late. Additionally, based off of, you know, some analysis of timeline of when we shipped and a few different milestones, I do think— and Tanner helped quite a bit. with this. Um, I do think we're probably looking at a launch date somewhere around, call it at probably at latest August 8th, but there is potential for it to be the 7th or 6th, maybe on the late side could be the 10th. And so, uh, in a weird way it could actually happen on earnings, um, which I think is probably too crazy. But, um, but yeah, someone had asked today if the company is planning on hosting investors, and I think they are, um, because they Previously, they are, or, you know, they informed me when I had asked about it that they were going to go to this cadence of having investors every other launch. And so previously, as most of you guys know, for Bluebird 8, 9, and 10, they skipped that. And so for 11, 12, and 13, my guess is they'll host investors for that. So with that in mind, we should get A PR for a launch date very soon. So maybe we get a double PR tomorrow or the 28th, but unless of course, you know, launch gets pushed back and it's not on the 8th, 7th, or 6th, but maybe it's the following week. But yeah, we're pretty close. I do think we are probably going to be launching sometime the week of the 3rd. And so, yeah, that's good. I mean, At earnings, there will be a lot to discuss in addition to the launch itself, which, you know, for those that are planning to be down there, I'm definitely going to try to make the trip. Our kids just went away for sleepaway camp for 2 weeks, and so I have no excuse if it happens over the next 2 weeks. So definitely we'll try to make it down. Let's see here. I'm going to see if there's any questions and then I'm going to talk about recent volatility. Let's see. So Scott Powell is asking, what's the main difference between Starlink D2D and Amazon's planned tech for D2D that allow them to avoid AST's vast number of patents? That's a good question. I don't know. I think for Amazon, it seems like they're following a similar architecture as Starlink. And so They're going to have to go through Starlink's patents and AST's patents. But yeah, you know, it's interesting. AST has not enforced any of its patents. Maybe it's not time yet, or maybe they're waiting for people to develop the technology and then perhaps they'll pursue them later. But I don't think the company will sit around idly for long. At some point they'll have to Go to other folks who are trying to launch constellations and remind them that, hey, we have patents. And so you can, depending on, I guess, how critical they are, you can license them and pay us royalties. Or I guess the alternative is you have to stop using whatever the technology it is and figure another way out. But yeah, I Scott, I wouldn't be able to tell you because I don't know Amazon's, um, because in this latest filing, there's quite a bit of, of parts of it that are confidential or redacted. But, um, I don't think we know, uh, what, what technology they're going to use. And so, um, but yeah, I would expect the company to enforce its patents at some point in the future. Uh, when, I'm not sure. Let's see here. It's an unrelated question. And then, okay, so I've got like 20 minutes left, so I didn't— I did want to talk about recent volatility. And yeah, the market has been tough. And it's not something, you know, the issue is it's not just AST, it's every growth company. I mean, if you look at— I know there's some people who are upset and and they've said, well, the company should be doing this, or the company should be doing that. Well, there's not much the company can do, right? Because everything's correlated currently. The space sector is down significantly, but if you look at any of these other high-growth areas, even semiconductors, right, or anything related to AI has pulled back quite a bit. And so we're just in this malaise, right, where you've got uncertainty around Iran. Is that conflict going to expand? It looks like there's going to be at least some short period of time of potential talks for peace. But in terms of the rate of change, obviously the rate was getting worse with the US striking Iran and Iran retaliating. And so now that we have this pause, we'll see if maybe things improve. But obviously it's tough, right? Because I think most people were optimistic for some type of lasting peace and that went out the window. And so we'll see how that goes. And then on top of that, you've got this Fed meeting that's coming up in July. And now I think we went from like a 20% chance of rates being, or rates going up to now it's like 40%, which is pretty high relative to where we were. And so, you know, does the rate picture change? And I think a lot of people have memories of 2022 when we were in a rising rate environment. And of course that was really bad for growth stocks. However, I do want to remind people that we went from zero rates from COVID to, I think it was eventually what, actually I need to look. I think it was like 6% or so. Fed rates. But yeah, those were really, okay, so they peaked at 5.25% to 5.5%. So we went from zero to over 5%, which is enormous, right? That was a huge move. And so now we're in this environment where the Fed is contemplating raising rates. Now, we're not in a— originally on this bull market, we were under the impression that rates were going to come down, but now we're at this point where rates may have to go up to a degree. And of course it all depends on what happens in Iran and a number of other things, but If rates do go up, it's not going to be anywhere close to what we experienced in the prior rate cycle. On top of that, I would, you know, the other thing is, as most of you know, is that AST SpaceMobile is well beyond what the company was facing in 2022, 2023. Now we're at the cusp of commercial launch. We've got $3.7 billion of cash where we've got all these def— all this defense work that's coming. Um, we're getting sovereign constellation, uh, awards, whether that's JLEO in Japan. We've got Anatel giving us 10x10 MHz in Brazil. Uh, we've got the EU, um, per this Bloomberg article, likely going to give us spectrum, um, in the 2 GHz reallocation that's going to happen in early 2027. And so there's a lot of great things that are going on, right? And so, um, so very different environment. You know, where will rates peak from here if we start raising rates? You know, it's— I'm not an economist, but you know, if we— if they have to raise rates another quarter, 50 bps, 100 bps over, you know, several quarters, is that going to kill us? Probably not. But that's the concern that the market has, right? And so you've seen a complete repricing of risk because of the war. And then of course, of course, because of rates. And so as a result, um, high-beta names have pulled, have come down, right? And so it's not just one particular company, it's all of them. It's like, it doesn't matter what news you have or, um, what catalysts are coming up, you know, stocks have repriced. And so that's just kind of, you know, the environment that we're in right now. And so the reason why I bring this up is that obviously it's not great. And this is a, this is like an important time where, just to reiterate, like not using margin or options as kind of your primary vehicle of investment. Now I've talked about it from time to time in spaces where if you decide to use margin, it needs to be tactical, like limited in terms of time, and you have to be very disciplined in terms of what your goals are. And if you don't meet your goals, to then unwind that margin even at a loss. And so, you know, that's something that's kind of a short-term thing where if you think you have edge and for example, you know, if you feel like, for example, the market has bottomed and your stock has been overtly punished and you have capacity, then you might use a little bit of margin, right? Like let's just say 5 or 10% margin. And then you set very specific risk limits, right? So if that trade ends up not working and after a week or so and you lose 10%, then you would have the discipline to cut it. Or conversely, if the stock rallied 20% or 30% and recovered, then you would sell down and cover your margin, right? And so I think it's important that people understand that Margin is not a long-term investing strategy. It's something that you do on a short-term basis. Similarly for options, you know, my own portfolio, I've used options from time to time, and I would say not more than maybe at the high end, like 5% of my capital, but usually it's much smaller. And that's where sometimes like, and you know, if you, the thing about options is like if you have a I remember when I first started learning truly how to trade options, my boss told me, well, the tough thing about options is you need to know exactly the timing of a catalyst, where the stock price will be. And if you can't predict those 2 things, then there's no point. Like being long options is a losing game, right? And so, and that's tough, right? Because options are a fixed price. And so if the market experiences some level of beta, meaning your stock moves along with the rest of the market down for reasons that are unrelated to the company, but there's a conflict in Iran or there's COVID, there's any number of things, then you can be wiped out for reasons outside of your understanding, control, whatever you want to call it. And so that's the risk with options, and that's why you don't want to have too much invested on the long side. On the short side, I know people like to short calls or short puts. There's dangers there too, right? So if you short covered calls, that's fine. You know, maybe I'll earn some income, but in essence, by shorting a call and being long the stock, you are effectively short a put, right? And so you have none of the upside up to a certain point. You have none of the upside, you collect some income, but you have all the downside, right? And so when people talk about that being a very safe strategy, It works until it doesn't, right? And similarly, shorting puts. Shorting puts is dangerous because oftentimes people will say, well, if you take this stock, let's just say, I don't know, Microsoft. Like, let's see where Microsoft's trading. Microsoft is actually a good example. So people, let's say, I don't know, in mid-2025. Microsoft's trading 500. Everyone feels really good about this, the SaaS story. And you're like, hey, you know what? I'm going to short one-year puts at 450 because lo and behold, if the stock trades down there, then I would be more than happy to own it. And in the meantime, I'll collect some income. But the issue is that what people don't realize is when you short a put and you come up with this mental framework of like, if the stock goes down, you know, $50 down 10%, then I'll be happy to own it, right? But you have to ask yourself a question. Why did it go down 10%? Like, is it for a good reason? Meaning maybe market beta, and even though the company's future is fine, the market goes down and then you get put the stock. Maybe that's okay. But if the stock is down 10, 20, 30%, what if it's for a bad reason, right? So like, the whole thesis around, oh, I'd love to own it there. Maybe you don't want to own it there. Maybe things have changed. Like in Microsoft's instance, the fact that AI, you know, people are using AI to recreate software and they're not necessarily going to buy packaged or software as a service, but they're going to develop their own tools. That's an existential threat, right? And so, you know, shorting puts is not a you know, you've got to think about what happens to a stock if you're happy to own it down 10%. Are you happy to own it down 30% because of something bad that's happened, right? Like in an extreme example, let's say there's an accounting issue or there's fraud, right? And so there's no free lunch, right? And so I think it's important when people, especially if you're long stock and then you short puts against that stock, you're basically just doubling your risk, right? And you don't have the upside, but you have twice the downside, right? Don't have the upside, meaning, oh yeah, you collect some insurance, you collect the yield, the premium, but then if the stock craters, you're going to lose the money, right? And the other thing about being short options is you've got to think about volatility too. And so in periods like where there's a high degree of uncertainty and stocks are going down, being short puts, like it's not just about where the stock goes, but what if volatility explodes? And so let's say you were short a put at $10 and the stock price for whatever it is moves down the equivalent of $5, but then vol expands because there's more uncertainty. And instead of being able to cover the put at $15, you've got to cover it at $20 because not only did, you know, let's, I'm just saying like in terms of deltas, like the stock, you know, the put went from 10 to 15, but then because vol expanded, it went to 20. And all of a sudden you're sitting there, you've got to put more money for maintenance margin, or, and/or if you want to cover it, it's not just the $5 move down in the stock, but it's also the 5 points that the put increased in value because of volatility. So these are all like really important things to think about, which I think, you know, for anyone who's invested in high-growth stocks that have a ton of volatility, the last thing you want to do is, you know, pack your portfolio with margin or options because, you know, in essence, you're already long for a lot of these companies. You're long a tremendous amount of volatility. And so, you know, when it comes to margin, for example, like you might have a few wins where it worked for you and and you delivered, you got outsized returns and hopefully you covered your margin. But eventually when people invest with 20, 30, 40, 50% margin, you're going to get wiped out. It's just a matter of time, right? Because that's just the nature of volatility where things that are out of your control will tap you out at the wrong time, right? And so I think it's important to just remind folks that If you're long space stocks, you're already wearing a ton of risk in terms of, you know, a lot of these stocks have a high degree of uncertainty and as a result volatility. And so people feel, you know, earlier this year they felt very good and euphoric. Oh, SpaceX is going public and you've got defense spending and a focus on space superiority and the US spending around space. there's a space race with China. Like, you know, it was a very positive environment. And now we're in this environment where things have sold off, right? And now prices and valuations of space stocks are much more reasonable versus where they were, let's see, 2 months ago at the end of May. And so I think for those folks who have been invested in space and know about the, you know, for a lot of these companies, they'll experience 30, 40, 50% drawdowns. The last thing you want to do is be loaded on margin and/or have options, right? Because the tough thing about options and margin is that you can be right on your thesis, but you're not going to have the staying power to see it through, right? Versus someone who just owns shares fully paid for in cash account. The drawdown from you know, for AST in particular, from the hundreds to 56 is painful, right? But then at the same time, because you're not having to sell and cover margin or to, you know, you're not in options, um, you can ride it out and be okay with it. And this is, you know, going back to, um, a point that I've made several times over, you know, the last, I guess, many years is if you have made— this is a good rule of thumb— if you have made your previous net worth in your investments, an important thing to do is take some of that money down and at least, you know, with taxes, of course, enough to cover for taxes, but set aside your original net worth, right? And then as you, if your portfolio has done really well and you've made, I don't know, let's, I'm just making numbers up, but if you've made 10x your previous net worth, then maybe set aside 3 times your net worth. Because at that point, what you're able to do is, you know, and this is for particular in volatile stocks, you're able to then take, you know, take down a win, right? And make sure you cover your taxes, but then feel good about it, right? Where you don't have to worry about the day-to-day volatility of the stock. And so like there's been 2 instances in ASC where I've been able to do that. And then the rest of my position, I just, you know, it sucks. It absolutely sucks that the stock is down at $56. But at the same time, like I know that I've, you know, the first warrant exercise, I think I, because of having to come up with capital to exercise the warrants, I had to sell a decent amount of warrants and pay for taxes. And also I took some money down. That was, I think, when the stock was in the high 20s, low 30s. And so when the stock did pull back to the 20s, I was able to buy back some, but then also I just mentally, I was okay with it because it was like, well, I did sell enough to cover my net worth before and I'm okay with it, right? Like mentally, I can, the rest of it is house money. I'm riding it, right? And then similarly, when the stock was in its 90s, I remember doing the post about having This was a time when I had sold some, but also donated quite a bit to create a donor advised fund, which for those that don't know, just go through my timeline, you can research it. But a donor advised fund, you can donate long-term appreciated stock and then you take a tax write-off for the entire amount. And then the proceeds of that sale, actually you can invest back into the market. like through, let's say, Fidelity. And then over time, you can donate all that money to whatever nonprofits you want, which is great, uh, because that investment will continue to appreciate, and then you get the full tax write-off in the year that you made the donation. But anyway, by doing things like that, um, you know, having a plan is important where— and I know, um, you know, me included, but I, I talk— I've talked to a few of you where, um, back in May when the stock price is at $130 or $133, and I remember selling— like, I had some speculative calls and I sold those, and I'd sold some levered ASTX, which I, I have very small position in that, uh, which, um, I, I'll get back to in a second. But, you know, I'd sold some, but I was like, oh, you know, we, we've got this momentum and we've got Blue Origin, um, launch coming soon. And then of course the The static fire mishap happened, right? And so that took the stock down 20%. And I think a lot of people actually had— I've spoken to SpaceBob folks as well. A lot of folks had plans to monetize, take some profits in and around that area or a little higher. But then of course that mishap happened. And so that was a stark reminder that space is really difficult and things can happen where for me, I remember going Into that evening thinking, oh, they're just doing a routine static fire. Like, what? This is great because they're going to launch the following week. And of course the rocket blew up and then the entire launchpad was gone. And so as a result of that, you saw the entire space sector start its derating, one-way derating from the end of May to where we are now. And so, but it's, I say that in that You know, it's important to have a plan. Like, if you have certain financial goals and if AST gets to 70 or 80 or 90 or 100 or 200, whatever the numbers are, like, make sure you have a plan and you stick with it, right? Like, you set aside money to, you know, cover taxes and take it out of the market as well, right? Because there's no point in staying fully invested again when you've made this plan to take some level of risk off. But what I was saying before too about ASTX, as we've seen, you know, this is, I've talked about the levered product where it's not something that you want to own long-term. It's something that you might play short-term. Definitely, of course, not on margin. But the issue with all these levered products is that over time, whether it's the short product or the long product, if it's 2x or 3x, they will eventually go to zero. Right. And so they can be handy if you, in the short term, if you think there's going to be a unidirectional movement that compounds your way. Similarly, if there's a unidirectional movement down, then, and if you're long these products, long in ASTX, for example, then it can hurt you. Or if you're long the short product, you might get some outsized returns for some period of time. But it's important to, when those products experience big moves up and down and there's chop where it's not one way, but it's kind of up and down. That's when those products suffer quite a bit because there's slippage from the fund having to ex— you know, utilize derivatives to deliver the return. But then on top of that, so there's, you know, expenses and costs there, but then also over the short term, you know, if you have this like chop, and they're big moves, call it 5% up, 6% down, um, that's where the product can really get cut, um, and, you know, approach zero. And so important lesson to learn. Um, I think, you know, if you're going to utilize some of those things, it can be for fun or for some small, small amount, but do not use those in size and definitely don't hold those over any long period of time. So more than a week, for example. But, uh, anyway, I've got to run, so That's my quick space for this evening. I know Kook is probably going to do one later today. So, but yeah, everyone hanging in there. I know, yeah, it's been a pretty tough time. And I think given some of the stories that have come out from this latest pullback, which, I mean, in all honesty, you know, AST at 56, we were here last year. And so yes, we've given back quite a bit. I think it's important from a mental perspective to Not have this feeling of, man, it was at $100 or $130 and my portfolio was at this amount. I need to make it back. No, you don't. Like, if you didn't sell there, then it's okay. That was all— those returns were all funny money, right? And so here we are where we are, and, you know, God willing, the stock will perform as the company continues to execute. But don't beat yourself up. Like this is just part of the market. Everything's down and don't do anything dumb to rob yourself of opportunity. Right. And just, you know, I think it's important. I sent out a catalyst, a list of catalysts earlier today. Just go through that list, remind yourself why you're invested and be okay with owning shares, right? Or just being long versus needing to lever up and try to make something back Which, you know, was arguably part of momentum interest in the sector. And of course, now we're in a different macro backdrop, which could change. It could change in a month or two. But in the meantime, you know, I think it's important to know what you own, be patient, and wait until the fat pitches come, right? And when the fat pitch comes and you feel good about it, then you can speculate to a But until that happens, you know, it's not the environment for it. But anyway, that's all I've got. I gotta hop. We'll catch up again soon. And thanks everyone for joining. Take care. Hi, it's Redrum here. Before we wrap up, I want to hear from you. I've left a pinned comment down below asking, Amazon just filed for 5,000+ satellites, threat to AST SpaceMobile or just a placeholder? Head down to the comments and drop your take. I'll be reading through all your replies. 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