Is AST SpaceMobile a Volcano About to Explode?

[00:00:07] Speaker A: This is the AST SpaceMobile Podcast.
[00:00:10] Speaker B: It will just basically come to the phone and be seamless regardless of where you are. We don't want the user even to know that it's connected by satellite. Listen, the opportunity that we have is very, very, very large. Okay. Good evening, everyone. Where to begin? I thought we were gonna do some sound bathing and chants, but I don't really know how to pipe in calming music to this because my podcasting skills are pretty primal. So at the next launch, I'll lead people in some Hare Krishna chants or something. So consider it a rain check. So I guess we'll have to get back to actual diligence, but This weekend I started to just get like really— it's not depressed is the wrong word, but just like exasperated. Market's kind of choppy and AST stock is just grinding. Me, seemingly all of us, just these periods of time when it seems like it just can't go up. It's always really confusing as to as to why. And so, you know, it just goes back to the weird way in which this stock works, where it wants to fade, fade, and fade things that we all think are significant, like perhaps metal in orbit. And thanks for Kevin Mack for writing a 12,000-word essay on why he no longer has a position in the stock and why it's worth 3 times revenue. So, you know, things like that I read and just go like, who, leave us alone. You know, let us have our little, let's have our fun. But, you know, the chart's confusing. I know the TA bros are trying to figure out which way is up. And so those guys don't have a lot of clarity. I actually spent some time last night with my Fable allocation just trying to backtest know, from the perspective of TA guys, I would say as usual, TA has very little statistical edge. And I've concluded in general that the guys that are TA-focused and use TA, it's not that they're wrong. I've just concluded that some of these guys have an extra element of skill that they probably don't appreciate themselves. And so while they're looking at things that end up having Statistical chance, which would mean that you shouldn't do it because it doesn't have edge. They themselves have some special sauce in their instincts, which does give them edge. And that's sort of my tentative conclusion because I like to study other techniques and I have a lot of respect for the people that do that in a way that exhibits really good judgment and edge. And so we all know who I'm talking about. There is a guy among us who has very good judgment and edge. And, you know, I take to heart when he doesn't really know the directionality of stuff. My response to him was, well, there's nothing I can do about it because I'm a long-term investor. I have my trading position around the edge, but, you know, you just, you can't redirect an aircraft carrier on a dime. That's just not how I roll. And so if the market's going to be dicey, then I'm just going to have to eat shit. It's kind of like what happens when you get into the wrong wave, which I do all the time. And so usually when I feel like this, it's something worth flagging, but I definitely feel like, oh God, is this thing ever going to go up? And what is it going to take to go up? And so this SpaceX IPO clearly was bigger in terms of dynamic than I had anticipated because it was very confusing of like what would actually happen. We've seen that the shorts actually covered, which is shocking to me. So on my personal stock loan desk, I see that the shorts covered massive amounts of stock, yet they didn't drive it up. It's very bizarre. And the volumes have been very weak. Very bizarre. And so we have what generally looks like a bull flag, you know, again going to TA, you Everyone's thinking like, God, we're in the wrong spaces. This guy's just like talking about charts all day. Trust me, I will go back to the promised path soon. But you have this sort of drying up of volume and coiling of events. And so then you ask, what events are going to matter? What's going to make it so that investors get excited about what's on the come again? One would think that operational cadence would be pretty important. And so watching some of the crap that guys like Philip Lyle put out where, you know, he's so smug, you know, the company ships a satellite and he's like, aha, look, it took an extra week or two. So the company's going to lose its entire edge. SpaceX for the win. It's like, okay, bro, you really thought this company was never going to ship any satellites and now they're pumping these things out. At three per month, four per month, and to him that's validation of his bear case. You know, paging Kevin Chen. Let's do some fact checking here. We know we've kept the receipts, but you know delivery of satellites seems like it's now necessary but not sufficient for a change in overall directionality. This stock unfortunately right now requires sort of positive grenades to shake it from malaise. And so until such time we have just bolstered cash flow and these sorts of things, the company relies almost on like an increasing dopamine hit to keep going up. That's kind of what it feels like. There's like a half-life to good news and then the company has to, you know, what have you done for me lately type of stuff. And so when thinking about it, to me, the thing I didn't even know about a month ago is now what I'm really focused on with ALEO. Because what is it that would shake the opinion of the stock market? Jaleo shows this sovereign model that's going to be replicated around the world and shows direct displacement of SpaceX. That would seemingly be very important. It also shows incredible leverage on the CapEx. These are exciting things. The other thing that we'll get to in a second is the final conquest of America by getting T-Mobile. These are the sort of things that I think shake the market to its core. And also what's interesting, I was talking to Tanner, you know, basically, you know, talking to the bros about just me whining basically. And it does seem like all this stuff is out there. Tanner was saying, well, you know, we've tweeted about Jaleo till we're blue in the face. Like, why is it not discounted? And, you know, just as someone who's maybe a little bit jaded just on how Wall Street works, I was last weekend, I was with my friend who's an extremely talented portfolio manager. He's a lifelong friend of mine and I think one of the best at what he does. And, you know, I just kind of see how he operates, which is always very insightful and nothing against him, but, you know, he has a coverage universe and has to really triage events, but capital E events, events that count in the eyes of other Wall Streeters versus our more nuanced events, which are kind of like shadow events until they hit. And so I just don't think that the marginal buyer of stock is really that adventuresome in trying to get ahead of events in a way that actually changes the stock price. And so It's entirely possible that the shorts sort of ran for cover. It is notable that the shorts ran for cover. That is kind of the first wake-up call of perhaps not all is lost. You know, if this is, if this is as bad as the bears want it to be, the shorts should be piling in. They shouldn't be covering. So are they taking warning from what we're tweeting? Because shorts are generally a little bit more educated than the next guy. And sophisticated people know how to trade. And so you're using dark pools and just generally kind of taking volume and being very careful about how you buy a stock not to cause it to run versus people just lifting the ask because they have a rapid reassessment of what's going to come. That's what ultimately drives the stock price higher. And so when you're kind of taking everything together, It really does look like a volcano about to blow. What is notable about volcanoes that are about to blow, people still go hiking on them. And so that's what's always amazing, is even when there are signs a volcano might possibly explode, without fail, it is almost always the case that there is someone on the volcano because, well, you know, it didn't explode yet, so I guess we're okay. And that's how I kind of feel the market is right now in the lulls of the summer. So let's get into fundamentals. I know literally zero people in the world care about my take on charts, and they are correct because I am a noise trader in this respect. Zero edge. Don't listen to me. But on the fundamentals, I think I have a pretty good view because this is how my brain works. So the first thing is execution. So the company put out a tweet with a great title, Execution in Motion. The company is executing, and this is ultimately the only thing that matters is tuna cans in space. Elon Musk launched his convertible. We are launching tuna cans, and these tuna cans do amazing things. So Bluebird 11 has now landed in Cape Canaveral. BB-2 and 12 and 13 are coming behind it. And so I know that the space mob Mossad is carefully tracking our assessment of when those will ship. And I think that we believe it could happen pretty soon. And importantly, the company immediately backfilled with yet another Bluebird in production. We are now happy to announce that Bluebird 38 has been conceived and it is in the Midland womb of connectivity. Very exciting. Trucking ahead. And so the next thing, we'll check in with our dear, dear friend Peter Lindmark. I'd also say I know he's Swedish, but you know Norwegians and Swedes for a time were were one people, and they're very sad about Norway's loss. But checking in with Peter, who noted that that they had updated this to Bluebird. 38 and flagged it to me. I'm always very appreciative of him. And so I updated my chart and you can see, look, we're starting to have that bottom blue bar go up of shipped satellites, yet the in-assembly satellites is remaining constant. And so this is going to converge at some point. So we keep shipping, shipping, shipping, and at some point these shipments are going to really explode because we have a lot of work in progress, WIP. For those of you who want to learn a little bit about accounting, the great language of business. And so the WIP has remained constant and increasing over time, and now the shipments are popping through. And so the company is executing, and this is going to hit a moment where all of a sudden, which is right now, in my opinion, right now being basically the next 2 months, the gloves are about to come off in terms of shipment capacity, which is then pretty cool where Space Mob, not to ever sleep, we have @TechInvestor assiduously follow Reddit, which I don't go on Reddit anymore because I value my mental health. And people figured out that ASTS Leased a large warehouse. And so it's in Titusville, Florida. What could be the use of this? Well, it could be ground equipment, and it could also be a way to store satellites so that they're not relying as much on the payload processing facilities for intermediate satellites. And basically just stage satellites closer to, but also have some more ground support equipment nearby for integration. And so it makes sense to have a facility like this close to the launch site if you're entering an extended campaign. Some of you will notice that I literally just read a comment by @BiggestTheRoman who said all those things, which seem like very smart comments. So I'm reading them. So that's exciting. Continue to see the company scaling out for big things because big things are, in our view, what are going to happen next. The regulatory stuff keeps Common regulatory frictions, I think, are now perceived to basically be zero. Sure enough, as we ship, FCC greenlights it. Drama around regulations should already be in the rearview mirror, but have it here nonetheless. Meanwhile, the tradable alpha on ASTS is very high. The thing we talked about last week during my halftime show, Which kind of blew me up ironically, I guess at that time zone more people listen. So one of my buddies, I guess he really doesn't know how to use X very well at all for some reason, found it and was listening to it and he's like, oh my God, I know who Kook is, but like wasn't totally sure until he had his wife listen to it and she's like, oh my God, that's beep. have to protect my identity. But anyway, sometimes I get outed on these spaces, so, you know, then I just swear him to secrecy and kidnap one of his loved ones so that you keep me secret. But last week, very quickly in our 15-minute halftime, we talked about idiosyncratic volatility. So this is a fascinating concept. If you work for one of these pod shops, you're really thinking about your idiovol. What that means is how much of a stock price movement relates to things related to the stock as opposed to what is related to the market. So a very simple example of this is if you have a REIT— so take just any random REIT— the idiovol of a REIT is very low. Call it like 15 to 20%. Why is that? The thing that generally moves a REIT stock price is, lo and behold, interest rates. And so if you own REITs, you're really just Trading interest rates. ASTS stock has extremely high idiosyncratic vol. Things that the company does impacts its stock price directly. Macro factors have a dramatically lower impact on the volatility of the stock because of the relative importance of one versus another. And so what's interesting about ASTS for for the traders is if you do research on ASTS. Your ability to make money on your research is extremely high on ASTS. In theory, there's a lot of alpha to capture with this stock versus just doing research on other companies that have much lower idiosyncratic vol. So where I'm going with this is we do a lot of research and we find a lot of incredible things. And so Tanner, who's an absolute research animal, was following up more on Jay Leo and noticed that it looks like the update to a formal grant, or in other words, the formal grant begins in mid-July. So here we are mid-July. We were wondering, you know, when are we going to get a formal press release? You know, I guess if at all. And as we flip over tea leaves, it looks increasingly likely that the next kind of hurdle could actually be this week. I don't know if that's going to happen, but it starts to get very interesting to have discovered that information. This is potentially raw alpha that we've uncovered, tradable alpha. And it just goes to the power of the space bomb and really the return on research for this stock. But you can see this slide that Tanner found and it says grant decision in mid-July. And then it shows that the funding, you know, is clearly laid out at $900 million with matching investments. So a total of $2 billion. This is again what we got really excited by. This is just throwing gasoline on the financial model for ASTS, but also then potentially scales the business commercially in ways previously not contemplated by the market. Very exciting stuff. So then we also had some tech alpha. So we got some regulatory stuff, we got some commercial stuff with JLEO, but then the real like kind of knock your socks off stuff this week was what we learned about the technology in terms of the spectral efficiency. Spectral efficiency is just how much data can be transmitted for a given amount of spectrum. High spectral efficiency means way more data with your existing Bluebirds. This is bandwidth effectively. I'm trying to think of the absolute perfect analog, but it's, It's very important. And so a bunch of the more technical Space Mob people, Katsu being one, another Smith here being another, Defying Client being yet another, and then many others quickly noted that being able to do 98.9 megabits per second on a 10 megahertz channel is shocking. In my model, I think I had been using a normalized number of like 2.5 to 3 bits per hertz with an upside case of 4, and now they're showing peak spectral efficiency of 10. This is a complete shock to my financial model if you believe that the company monetizes based on the quantum of data it can transmit. Well, it's not necessarily true that there's a one-to-one relationship between data transmitted and money, But it sure as hell is not zero. This service was always thought and likely is always going to be a bandwidth-constrained premium service. It's not going to necessarily be used to power your home every day and watch Netflix just because satellite capacity is so premium. But the more of it means more of these premium use cases you can meet for a given constellation size. And so this is a big deal. I wouldn't necessarily expect the stock to just rip on this because again, it goes to the type of event that is it going to cause someone to start sloppily buying the stock at any price, or does this become a little bit of a reservoir dog standoff where it's like, well, I know this is super bullish, but I don't really want to get ahead of my skis because no one else seems to be driving the stock up higher. So I'm going to pause and be confused a little bit. And, you know, that's kind of how I view this. This is one of those geysers we found before an explosion of relevance, but it's a big one and it shows just how quickly the technology is leaping forward. It shows just how incredible the product roadmap has been and also the unlocks to this technology as the company is out there With its actual satellites testing, experimenting, upgrading. It's a testament to the vertical integration so that they can experiment and make changes. And you already have to be at this position to be improving. So for all the companies that expect to one day match this technology, they haven't even started. And we're way past the start phase. We're now in the tripling of our initial capacity phase. And we've only just begun. The next thing is some regulatory alpha on grain management. So we had some contract alpha with Jay Leo. We've had some tech alpha with the spectral efficiency, and now we have some regulatory alpha with what appears to be some more spectrum that we'll find. Its way to ASTS. So Katzi did us all a solid, as usual, of quickly and succinctly mapping out the timeline of grain management. So on July 1st, the FCC approves T-Mobile, uh, the T-Mobile grain spectrum deal.
[00:21:33] Speaker A: Okay.
[00:21:33] Speaker B: July 2nd, one day later, ASTS SpaceMobile files, um, STAs to test the band. They filed it the very next day. And then Chris Sambar goes to T-Mobile. We'll talk more about that in a bit. A lot of coincidences. And so now, is the stock going to rip with another spectrum lease? I don't know. Maybe, you know, the NAV people will understand this, whether they start to revalue the stock just on that alone. I don't know. But again, it's this coiling spring where all of a sudden more spectrum that's leased efficiently, that's the general premise you have to believe in, is that any contractual lease for spectrum is done at a price that works for everyone. This is just more embedded value that comes out at some point, whether you get value for it upfront or it's a pay me later once our system is operationalized and it just has a lot more capacity to play with than what people had originally anticipated. These are the things that start to stack up, where if you know what you own, you feel very comfortable again that you found a volcano that's about to explode. We also had Legato pop up in the news. So there was a rumor that was not showing up in the docket just yet—is that Legato was in talks to settle the $39 billion DOD lawsuit. So this is called the Takings lawsuit. This is the lawsuit that. Legato filed against the Department of Defense, Department of War now, effectively that its spectrum was condemned without consideration. And so the spectrum is the property of Legato and the Department of Defense just took it. Pretty clear constitutional issue, one would think, having read the takings lawsuit. It is about as clear as day to me that the Department of Defense cannot do this. I think the DOD trampled them figuring that maybe they would go bankrupt and don't have to deal with it. But in any respect, the settlement of this lawsuit is most likely not going to be $39 billion. Settlement could take many different forms, but the ultimate importance of this settlement is that once it's concluded, Legato is less concerned about having to own its spectrum because that might reduce its standing in the lawsuit and could then engage in what is a very logical thing to do, which is to trade back its royalty override and the lease payments back to ASTS in return for ASTS stock or something like that. This to me is something where the 2 entities should consolidate at a ratio to be determined, But that would just massively simplify the whole structure and something that as a long-term ASTS shareholder, I'd like to see. And hopefully it's done in a very accretive way because Legato as it is, is stuck with sort of an exotic portfolio of these lease payments and then a royalty override, which they'll have a hard time monetizing. And so I think that they would like to figure out a way to exchange those 2 assets back for ASTS stock, which then they can distribute to their partners and things like that. I would expect this to happen on a timescale of years, so nothing imminent, but one more shoe to drop on this. So minor point. So now going back to the Pompeian existence we all have, or really what the shorts have, or the Pompeians looking at the mountain thinking they're safe, and little do they know they're about to be carbonized. And so let's check in with our favorite technical analyst guy who we've converted to looking at fundamentals. And so he did a nice job laying out all of the events against the chart. And so this is the tweet that I titled A Vesuvius of Milestones. And so the milestones just keep building up. And so these are the fundamental drivers of value, but then the stock just chops. And funny enough, when you kind of zoom out, these moves from like $70 to $120, when they're happening, of course, are like literally life-changing for me. But now that you've seen this consolidation band, it actually looks a lot less dramatic than it felt, and it starts to actually just look like what it might be of these sort of like 9 to, you know, 9-month consolidation periods before the stock resolves a certain way. And as Reform points out, you know, imagine looking at this chart with all these milestones and thinking that it's priced in right after Starlink added $500 billion to its market cap from its IPO, which is, as he points out, 20 ASTSs, when analysts think that the mobile market is the large growth driver for Starlink. The disconnect between these things is huge. Now, I wouldn't expect it to close overnight. This is one of those things where I could be wrong, but I fully expect that as an ASTS shareholder, I'm going to have to pay the price of waiting for the company to actually do it. And so I don't have any expectation that ASTS is just going to magically trade to a trillion dollars in anticipation of events. Life generally doesn't work out so easy for me in this respect, but you can see the pathway and you can see all the building blocks put into place so that as the constellation goes up, we convert Those prior achievements into a present reality. So what are the other exciting things? So T-Mobile just continues to look very exciting, and so we believe that the one-year anniversary date for the SpaceX contract is in August, and the tone as Anpanman has nicely. highlighted for us of T-Mobile has changed massively. And so previously T-Mobile would speak very favorably of SpaceX. That turned flat out acrimonious recently, tells you all is not well. And then T-Mobile, in a shock to all of us, appointed Chris Sambhar, who had been our guiding light at AT&T, who's the reason why ASTS has the AT&T support. Probably the reason why ASTS exists at all. Chris Sambar shows up at T-Mobile as the chief enterprise officer. This is really exciting stuff. And so here is a guy who singularly is responsible for AT&T engaging with ASTS, who was at the launches, who. Did podcast, who's a fierce supporter for all of these causes. I've personally met him. I know a lot of you guys have met him. Chris Sambard is a real standup guy, very honorable time in the military, a real leader, but most importantly for us, a real thought leader and seemingly very aggressive at finding the next technologies to drive business forward for his companies. And so now he signed up with T-Mobile exactly 2 years after leaving AT&T. It's shocking how fast time flies. Um, and that's right on time for gardening leave. And it's right on time for when we were thinking T-Mobile was going to sign a deal with ASTS anyway. Cosmic coincidence, one might think, right after T-Mobile engages in the JV with Verizon and AT&T. Another coincidence. Pretty crazy. Now, what would happen if T-Mobile signs a deal with ASTS? I find it unlikely that the stock goes down 10%. That would be my simple summary of that. So it's another event that I am looking forward to. Timing uncertain, but so many pieces of this puzzle are now there, not limited to the grain management. which appears to be related in all of this. So at the same time, we have SpaceX also effectively confirming this same speculation. SpaceX is now basically conceding the US D2C market to the JV. And so they're guiding that they're only going to have 1% penetration of this market in 2030, 1%. That implies flat out that they lose T-Mobile. And so if T-Mobile is going to have a solution in this market, which would appear to be a 99% probability that they will, seeing as they signed a specific D2C JV with Verizon and AT&T, then you kind of know who they're going to do a deal with. Very exciting stuff. The other things that just had me thinking this week are again not new to anyone that's ever listened to one of my spaces before, but it's really thinking about ASTS as a tech platform. And this is what's so powerful that I've really become humble too. I generally think I'm a smart guy, but I'm generally wrong, and I'm not that smart. And so what I've come to realize in my life is just how smart other people are. Especially those that are close to problems that affect them. This is to say that I don't believe in command economies. I don't believe in communism. I don't believe that a Politburo can direct a market to all the individual problems that exist. I believe in capitalism. And so on that same note, I don't believe that a company's business development group is going to really have a deep understanding of dog collars. for example, or cow collars, for example, or how to herd sheep, or beacons for maritime environments, or what surfers want in case a shark bites them offshore. All these things, these problem statements live with people close to the problems. And so if you have a tech platform that is open so that developers can work with it, either through APIs, well, especially through APIs, but also through access to the tech that then they can build into their own hardware solutions. That's how you start to massively expand how your technology can find very high-value markets that themselves might be small and might not justify a command economy approach to go tackle 500 little small use cases. But for the small company that wants to solve a very specific high-value problem to its customers, the leverage you get by empowering them to do so is massive. And so pet tech startup Fi launches a new dog collar with Starlink satellite connectivity to track pets off the grid. And so when looking at this, you have this massive collar. Think about the dogs. You want a small collar. And, you know, this company is raising money for this. There's a business case behind it. Is this going to be the next great VC-backed company? Probably not. But is it going to have a pretty obvious business model of selling the tech and then effectively selling the cellular plan back to Starlink? Yes. Is this an obvious thing for AT&T, Verizon, and T-Mobile to open up their networks to enabled via ASTS? Yes. Why? This allows them to sell more cellular plans via their partnerships with AST SpaceMobile. There's always a way AST SpaceMobile could go direct with its own spectrum. That's a debate for another day. But this is the stuff that gets me really excited, excited because it's a scalable way to approach these otherwise small, high-value markets in a scalable way that ultimately results in a massive high-value TAM. Because then we start to talk about how much data we're consuming per connection and how much we're charging per connection. And a lot of these things are going to be very low data intensity and very high dollars per month. So when you start to standardize things in terms of dollars per month per gigabyte, you could start to have numbers that are absolutely off the charts. And then you start to pair that with our spectral efficiency and we have way more data. That's how you start having pretty cool outcomes. So I hope People can kind of reflect on what I'm saying. Hope I'm communicating it clearly enough, but this is not going to be the last time I talk about this topic. Hopefully each time I can find a way to communicate it more clearly so that ultimately anyone that wants to understand what I'm saying can. Lastly, we have Blue Origin raising money. Pretty exciting, raising $10 billion at $130 billion valuation. Uh, Rocket Lab bros rejoice, although I think they're missing the plot here. Having the company with a way more scalable rocket, um, get more access to capital is not good for them. But I'm not going to get into that. Um, it does show that Blue Origin is deciding not to go bankrupt. I think we already knew that, but they are playing to win. And then we had an update from David Limp. The CEO of Blue Origin, just showing how fast they're rebuilding their launchpad capacity, which is exciting. Time will fly before you know it. It's going to be December. Whether or not they're launching before year end, in my view, doesn't matter because say they do launch before year end, you know, mazel tov. Good job, guys. If they don't, then by December, It will be so close to when they launch that it'll be moot anyway. And maybe it's January or February or March and it really will be all the same. So exciting stuff happening at Blue Origin. So that's everything that I have this week from what I can think of. Feeling pretty glum. Time for a sound bath. I did yoga today. Went for a surf, talked to some 12-year-old about how he caught a head-high wave. And I pointed out that when you're 4 feet tall, head-high wave is like not the same. And I think I kind of— and he was like with his little girlfriend. I think I just totally gutted him in front of the girl. I was like, yeah, bro, that's like head-high for you is, you know, waist-high for me. And he was like, oh. So I did my duty to just chop down a grom, um, where he, where he, where he was floating to do my part to humble society. And, um, trying to stay distracted because the best way to be a long-term investor is not watch it every day. I've doomed myself by committing to write a weekly and doing Spaces, which makes it so I have to watch this insufferable stock price action. But I would just remember that the stock, you know, key takeaway is the stock has extremely high idiosyncratic volatility. This is a term I hope everyone can kind of learn about. And embrace. It's something that, uh, comes naturally to me. And factually, the stock has extremely high idiosyncratic volatility, which means that our research allows us to capture return that others cannot because they're not doing the research. So for everyone that's chasing down random little filings in Japan, this is just a long way of saying thank you. keep doing it because all of this mosaic of insights culminates in us being able to put together a puzzle faster than other people. And while we get beat up in the meantime through some of these corrections, it truly allows us to know what we own and hopefully end up having a very successful long-term investment. So I will End it here, and I hope everyone has an absolutely wonderful week. And I am gonna be back at home next Sunday, so we should be back same time, same place. Adios.
[00:38:37] Speaker A: Thanks for listening to the AST SpaceMobile Podcast. If you enjoyed this episode and you'd like to help support the podcast, please share it with others, post about it on social media, or leave a rating and review. To catch all the latest news about AST SpaceMobile, make sure to subscribe. Thanks again, and I'll see you next time. Listen. Mmm, waffles.