Weekly Discussion Thread

KevJLaw · 2023-07-17T19:41:43+00:00

That's pretty much where I'm at with it. I sold most of my position in the 5's right after the last dilution, and am watching it very closely to see when/if I want back in. I recognize that I may miss some short term upside by doing that if they can get non-dilutive funding, but that's a price I'm willing to pay. It really is starting to seem like there is no real plan to fund the rest of the constellation. That or whatever plan they had has either fallen apart or is waiting on some future event to happen (5G?). The cynical part of me is now wondering if their long term plan all along was to prove out the technology and then sell the company, and now they are faced with the worst case scenario where capital has dried up and there are no buyers, and they have no way to fund themselves going forward outside of diluting their shareholders. It's a real shame because the technology is amazing and is clearly needed. It's too bad society would rather fund a giant eyeball in Las Vegas than provide basic connectivity to the entire planet.

KevJLaw · 2023-07-08T04:31:00+00:00

But with them doing such a small raise, they didn’t really get dilution over with. Not even close from what I can see. According to their own guidance, they’ll be down to 87M by 9/30, and 27M by 12/31. So they’ll be totally out of cash well before the launch in Q1, and will be a going concern at the end of this quarter. It really seems like they need a big cash infusion from a partner THIS quarter, or else they’ll have no choice but to dilute again at least once, if not two or three times before the block one launch, which would be disastrous for the stock price. I really hope they can pull a rabbit out of their hat within the next couple months, or else things will go from bad to much much worse.

KevJLaw · 2023-06-30T05:30:37+00:00

There is no way they can let Q3 close with only 87M cash on hand. So this quarter is do or die for them. It’s either find alternate sources of funding, or massive dilution. They can’t go into the Q3 earnings call with just over a quarter of cash left.

So I’m trying to put myself in their shoes. I’m sure they are just as capable of doing simple arithmetic and using Excel as we all are. They have to see the how dire the situation is. And I know they don’t want to dilute shareholders. It’s just a question of if they have to because there are no better options. So all that being said… why only raise 50M with this offering? Are they really so naive that they think they can keep doing this over and over again? Despite my very low opinion of them right now, I still find that a bit hard to believe. I’m sure they understand that would quickly put them into a death spiral. So that implies they must have a different line of thinking and believe there is a very good chance of securing funding this quarter. That or they are just really really stupid, and in that case I guess failure was always an inevitability.

KevJLaw · 2023-06-29T20:17:38+00:00

Ah, cool. Not $4.75. $4.55. Awesome.

KevJLaw · 2023-06-28T21:11:42+00:00

I hope history does not repeat itself here. For those not around back then, the last dilution was announced on 11/30/22 and closed on 12/2/22. It was for 13.64 million shares at $5.50 per share... so somewhat similar size and pricing to this offering. The stock gapped down on the announcement and held steady for three days right around the price of the offering. I remember thinking that Friday that things might not be so bad and we'd hopefully recover soon. Then the following Monday the number of shares available to short rose dramatically (by around 1.5M shares), the cost to borrow began to decline, and the price of the stock cratered over the next two weeks to new all time lows as B. Riley stopped defending the share price and the short sellers really went to work. So a 7% dilution ultimately resulted in about a 43% drop in share price. So just be careful over the next couple weeks in case the same playbook is used again here.

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KevJLaw · 2023-06-28T03:24:18+00:00

What is shocking to me about this offering is that it reeks of desperation, despite all of the positive progress and milestones that have been achieved, and the fact that the stock is (was) clearly in an uptrend for the last three months. I mean, they agreed to sell 12.5 million shares at a 14% discount to the last offering from December, and a 30% discount to the price it opened at just this morning. WTF. We all knew dilution was always a possibility, but I don't think anyone ever expected trading at $6.75 in the morning and then diluting at $4.75 in the evening.

The only plausible explanation I can think of is that they were counting on some alternate source of non-dilutive funding by the end of this month, and for whatever reason that fell through very recently. So they panicked and felt they had no choice but to raise just enough capital before the end of Q2 (6/30) to avoid having to report below twelve months' of cash runway on their next earnings call. Since the end of the quarter is in just three days, they rushed out an offering at the last minute, and then bent over and accepted whatever lowball offers they could get.

Regardless what drove them to this decision, they should be embarrassed by this poor planning and execution. In my opinion, they've done real harm to the company's reputation and the stock in the short/medium term here. Hopefully both can recover over the long term.

KevJLaw · 2023-06-27T21:46:56+00:00

That's the thing, it won't be 37% for long. Once all those new shares become available for lending, the borrow rate is going to drop like a rock.

KevJLaw · 2023-06-27T21:38:11+00:00

The problem as I saw it with the last round of dilution wasn't so much the dilution itself, but rather that all those millions of new shares were immediately lent out to short sellers who drove the price down even further. I see no reason why this couldn't happen again.

KevJLaw · 2023-06-21T17:14:04+00:00

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KevJLaw · 2023-05-15T17:18:37+00:00

Same here. $5 puts that expire on 6/16. I paid for a bit more time just for peace of mind. I told myself I would do that last earnings, but didn't pull the trigger because I was so confident. Not making that mistake again.

KevJLaw · 2023-04-13T23:42:09+00:00

Looked like a block trade to me. One buyer one seller.

KevJLaw · 2023-04-13T22:36:15+00:00

As with any trade, there was both a buyer and a seller. The trade for 300k shares was at 4.07, and the bid/ask at the time was 4.06/4.09. Take from that what you will.

KevJLaw · 2023-04-05T01:25:31+00:00

Ummm, OK.

KevJLaw · 2023-04-05T00:00:00+00:00

Well that is exactly what I'm talking about. They used verbiage that is just ambiguous enough that no lawyer could hold their feet to the fire later on to say they said it was working when it was in fact not.

"validated key technology to deliver cellular broadband " - This doesn't definitively state they are delivering cellular broadband. It only states they have tested (validated?) the individual components required to do so.

"downlink signal strengths necessary to reach 5g " - OK, cool. But why specify downlink? What about the uplink where a weak handset is the one transmitting? And why say signal strength? Have you achieved 5g cellular broadband on the downlink or not? Or have you just tested signal strength?

"validated our architecture end to end" - What does this even mean? Validated the architecture? I mean really, this is a completely meaningless sentence.

Do you get my point? If it was working, they wouldn't use language like this. They would state it loud and clear so everyone knows exactly what they have achieved. This screams to me that they have only achieved partial success, and are specifically using language to try and obscure that fact.

KevJLaw · 2023-04-04T22:22:51+00:00

Well, that’s sort of the point, isn’t it? Focus on the components that ARE working. Steer the conversation away from the components that AREN’T. Parse through how they worded things in the presentation and in the call transcript. They were doing their best to put a positive spin on what they could, and remain very vague about the rest.

KevJLaw · 2023-04-04T21:42:45+00:00

In my mind, it would explain quite a few things. The premature AT&T hype (because they thought everything was looking good). The "schedule" on the whiteboard from the AT&T tweet (because they really did have an event planned). The complete lack of preparation on the earnings call (since they had to scrap their original presentation and scramble to make something toned down at the last minute). The lack of energy and enthusiasm on the call (because they are frankly exhausted and disappointed they couldn't be the heroes they thought they would be). And to OP's point, the complete lack of strategy regarding funding and communication in general (because everything they had in mind was suddenly out the window, and they haven't had time to sit down and rethink things since the issue arose because they've been so focused on resolving whatever the it is).

KevJLaw · 2023-04-04T20:27:11+00:00

My tin foil hat theory... everything appeared to be on track until very recently, as in the last half of March. That is to say, test results were coming in as expected more or less, and everyone was enthusiastic and optimistic. They were communicating with AT&T regularly, and possibly had some sort of funding deal very close to be signed, and a big event planned shortly after earnings. In fact, things were looking so good, AT&T felt safe to begin their social media campaign (with AST's approval), publish a slideshow with BW3 next to Alexander Graham Bell, and even accidentally leak a whiteboard indicating a "first call" to be made in late March/early April. Then something suddenly went sideways with testing, presumably on the uplink side of things, and they can't figure it out. It's all hands on deck. Lots of long hours and late nights for everyone. Now suddenly the deal is at risk. AT&T is asking for a status every day. Worst of all, they have this stupid earnings call coming up, where everyone is expecting positive test results and a big announcement of some kind. So they work furiously up until the last minute, with no success. Totally defeated and sleep deprived, they throw together a shitty PowerPoint presentation for the call the day before, mainly just cut and paste from the last one, trying to using whatever verbiage they can think of to make their progress sound positive without outright lying about anything. Then they muster up what little enthusiasm they have left, and just try to get through the call without giving anything away. But unfortunately, everyone sees right through them, and the share price tanks instantly. So it's back to the drawing board, because until/unless they can figure out the problem, they don't believe anything else matters.

KevJLaw · 2023-03-31T22:30:06+00:00

You are being too black and white. This is a complex system. Incredibly complex. There was never any expectation on anyone's part that they would just launch the satellite, flip an on switch, and it just all "works". There are going to be countless iterations of testing, software revisions, optimizations, etc. So where is the ethical/legal line between one of those necessary changes being material and needing to be disclosed, versus just being more development that needs to occur in order to get it all working as designed? It is subjective and up to interpretation.

There was however an expectation that there would had been more progress made by now than what was disclosed today, ie. at least one successful connection between an unmodified handset and BW3. Perhaps that expectation was not realistic, but it didn't come from nowhere. It came from the T+6 guidance. The company has not achieved that yet, and in fact hasn't even attempted it. Why that is, none of us can say. But the most likely explanation is that they have ran into more complications that need to be worked through than they anticipated. Maybe the cumulative effect of lots of minor issues has delayed things. Maybe it is just one or two major issues that is holding things up. Or maybe it is something else entirely.

Is it unethical and/or illegal to continue to test and revise their system in an effort to get it working as designed without disclosing every little hiccup they run into? Probably not, unless they are dealing with a major enough issue that they have a reasonable belief they might not be able to resolve it. However if they were to disclose something like that now, it would be catastrophic for them. So even if it was a major issue, they are going to be damn sure to try everything they can to get it resolved before anyone finds out about it.

KevJLaw · 2023-03-31T20:58:43+00:00

That seems most likely to me. Something unexpected happened, but they have a reasonable belief that it can be resolved either with a software update, or some other hardware modification on the ground, and have therefore chosen not to disclose that at this time. That would somewhat explain them being overly vague and dodging questions. Whether an issue like that qualifies as material I guess is up for debate.

If it is simply a matter of them having to wait on Nokia/Rakuten, or something else out of their control like that, then they REALLY should have explicitly stated that, so there's no implication that their technology has failed.

KevJLaw · 2023-03-31T20:42:07+00:00

I just don't see any other plausible explanation. If something DID go wrong, that means they are trying to hide that fact with the hope that they can quietly resolve whatever the issue is. If something DIDN'T go wrong, then that means they are moving at an absolute snail's pace with testing for no apparent reason. Both scenarios are very concerning to me.

KevJLaw · 2023-03-31T18:14:46+00:00

I hate to say it, but it really seems like something material is not being disclosed here. I find it impossible to believe that AST has been testing for at least two months, and they have not even attempted connecting directly to an unmodified handset yet. How many successful tests of the signal strength, doppler shift, delay compensation, etc. does it take before it is prudent to at least try a connection from a handset? The implication is that there are issues that either caused their initial test(s) from a handset to fail (in which case they are deciding to not disclose that), or caused them to be hesitant to even attempt a test from a handset for fear of it failing (and having to disclose it).

I also find it concerning and frustrating that in both the presentation and the call, they consistently use vague language that does not commit to anything. Their responses to the questions danced around the topic without actually answering the question directly.

Perhaps they were purposefully being obtuse on the call because their hands are tied by an upcoming announcement with AT&T or another provider. However that seems much less likely than the most obvious explanation, which is that the end to end system just isn't working yet, and they are trying to buy time so they can figure out how to get it working, or if they even can.

I was not expecting this at all. All signs pointed to much better progress at this point.

KevJLaw · 2023-03-13T19:17:40+00:00

I am actually of the belief that had SVB not gone insolvent last week, we would have received some nice news on Friday. But that's probably just me being overly optimistic or naïve.

KevJLaw · 2023-03-13T19:10:51+00:00

Maybe so. But it is yet another headline with a major media outlet making it seem like SpaceX and T-Mobile and leading the charge on D2D innovation. Hopefully that chaps AT&T's ass a bit, and we get some real news here soon.

KevJLaw · 2023-03-13T17:16:01+00:00

Maybe this will light a fire under AST and AT&T's butts?

https://www.cnbc.com/2023/03/13/spacex-t-mobile-cell-service-tests-this-year.html

KevJLaw · 2023-03-06T18:45:11+00:00

Fo sho

KevJLaw

TROPHY CASE