Trend Trader’s “The Secret $5 Company Behind Elon’s Race to Own the Internet”

What's being teased in the latest ads from Lou Basenese? Latest version says, "Is Elon Musk Secretly Working with the U.S. Government to Schedule a Massive Disruption To Your Internet Service on March 1st, 2021?"

By Travis Johnson, Stock Gumshoe, January 5, 2021


This article was originally published on December 1, 2020, but we’re seeing new versions with different headlines and that “March 2021” deadline, so we’re re-publishing our comments below. What follows has not been updated or revised in the past month.

Lou Basenese is pitching Elon Musk’s next big idea in ads for his Trend Trader service (which is currently being sold for $149/yr), so let’s have a look and see if we can name that stock… and cut through some of the hype for you.

It sounds impressive, for sure… here’s the lead-in:

“… when Elon flips the switch and turns on his new “Super Internet” on December 31st, this new tech breakthrough will change the world FOREVER…

“His ‘Super-Net’ will instantly render every cable, TV, internet & phone service OBSOLETE…

“Furthermore, just like all big tech revolutions, Elon’s latest project could instantly transfer billions of dollars of profits from old, inefficient industries…

“Right into the pockets of the shareholders of Elon’s ‘Super-Net.'”

And as with all such ads, he’s predicting big gains as a result:

“On the low side, I’m projecting an investment in Elon’s New Super-Internet could double your money…

“And on the higher side, you could pocket more than 47x your investment!

“That means a small $5,000 investment today could turn into nearly $10,000 on the low side…

“And on the high side, if all the stars align, as much as $235,150!

“I’ll show you irrefutable proof on my profit projections in a moment…”

No, the rules of logic have not changed — using the term “irrefutable proof” is silly and misleading here… you still cannot prove that your future profit projections are accurate. You can provide evidence to support your projections, of course, so what does he share?

“Elon knows there’s only one thing he can do to “one up” Bezos and take control as the world’s richest human being…

“And that’s to dominate the biggest business of all…

“The internet itself.

“See, Elon’s poised, right now, to demolish the ENTIRE $1.32 trillion Internet, Cable & Phone market with the single flip of a switch…

“And when he flips that switch, he could become the world’s richest man, overnight…”

You’re probably still a little tired from the Thanksgiving holiday, so I’ll save you some of the pages of hype and chatter on this point, but yes, what’s being teased is SpaceX’s Starlink program — Elon Musk’s (still private) SpaceX is building a low-earth orbit (LEO) constellation of satellites that will be able to provide broadband internet service.

More from Basenese…

“You’re not hearing about this project in the news right now because the service is limited to beta-testers only…

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“But as one of the most accurate tech forecasters in the world, you can mark my words…

“By December 31st, Elon’s Starlink service could roll out to YOUR HOME TOWN… and beam perfect, fast internet directly from space itself, from the stars…”

That word “could” is excellent, isn’t it? It posits a hypothetical, and therefore doesn’t really constitute a legal promise. Of course the possibility exists that your area will be eligible for beta testing the Starlink system… is it a probability? Well, that depends mostly on where you live, and on whether they need more beta testers. Certainly it won’t be moving beyond “beta testing” by the end of the year, that has barely begun.

And as with past ads about the rise of satellite internet service, they imply that this will destroy competing technologies overnight…

“Once this company gets rolling, it would be difficult, if not outright impossible, for the cable companies to simply ‘copy’ its ‘Starlink’ technology.

“Which means…

“Come December 31st, the train robbery FINALLY ends. Big Cable Dies.

“And Elon’s ‘Starlink’ is Born.

“Soon, you could be using Elon’s groundbreaking technology to get access to the Internet…

“From ANYWHERE in the world.

“Not only that, but you could get this global internet access:

“At 12x the speed of your current provider…

“For up to 98% less than what you’re currently paying…

“And because it could be beamed to your computer or mobile phone from space, it could give you impeccable coverage no matter where you are!”

That’s a pretty wild exaggeration, of course — there’s no indication that Starlink’s satellite internet will be cheaper than current broadband offerings from the telecom companies (yes, it will almost certainly be cheaper and better than the most egregiously-priced current satellite offerings, but that’s another thing entirely). It might be faster than some terrestrial broadband offerings, maybe even most of them, but that really remains to be seen — we’ll have to see how the load is handled once they get more than a few beta testers.

And, of course, the initial Starlink rollout requires a ground station — a dish antenna that’s attached to a pole or a building, not terribly different in size from current satellite TV dishes (though much more modern looking). This is not going to be a “wireless internet to your phone” service in the foreseeable future, it’s really competition for and a supplement to fiber optic networks.

So yes, Starlink is still being launched… and yes, it could be a big deal for those who aren’t already able to get broadband internet service, but no, it’s not as dramatic or imminent as teased when it comes to competition for Comcast and AT&T. It’s more likely to extend the internet to more people over the next several years then it is to compete with existing broadband providers.

Still, that could certainly be a big business eventually… will it make us rich? Basenese seems to think so… more from the ad:

“… the PERFECT time to invest in a new technology is after it’s proven…

“But BEFORE it’s fully rolled out!

“This ‘de-risks’ the investment as much as possible.

“And that’s exactly why I’m writing to you today…

“Now is the PERFECT time to place our investment bets…

“And see potential returns of 95%… 948%… even 4,743%…

“With as much safety as possible.

“But we’re going to have to jump on this right now.

“Because now that the tech is in place…

“And now that the speeds are proven…

“The only thing left for Elon to do is to flip the switch and turn on the network to all Americans…

“(translation: trillions of dollars could soon flow into Starlink!)”

For some context, here’s how Starlink describes its plans and progress:

“With performance that far surpasses that of traditional satellite internet, and a global network unbounded by ground infrastructure limitations, Starlink will deliver high speed broadband internet to locations where access has been unreliable, expensive, or completely unavailable.

“Starlink is targeting service in the Northern U.S. and Canada in 2020, rapidly expanding to near global coverage of the populated world by 2021.”

And yes, they’re launching satellites like mad — trying to get roughly 100 Starlink satellites launched almost every month. They’re small, and dozens of them can be launched on a single rocket, but we’re still talking about a complex global network of that’s likely to be about 1,000 500 pound floating flat panel satellites by the end of December… and roughly 12,000 when they reach their immediate goals.

It might be a huge business. Clearly, there are a lot of people around the world who would value a competitively priced broadband option, even if it’s just as expensive as what folks in Philadelphia pay for high-speed broadband from Comcast (there’s no official price I’ve seen, but current reports are that the beta testers are signing up for $99/month service, with a $499 fee for the “starter kit” that probably means they’re partially subsidizing the estimated cost of $1,000+ for the antenna). Right now, the early beta testers are reporting download speeds of as much as 150-200 Mbps, which is almost as good as the premium version of Comcast’s home broadband speed in my area and priced similarly… and, of course, dramatically better than the current satellite internet from Hughes (about 25Mbps) or the phone company’s DSL service (ranges from 5-30Mbps).

But, we should remember, it’s also a privately owned business — Starlink might be the most valuable subsidiary of SpaceX, which is also private, and it might get spun out at some point as they’ll want to raise more capital to build out the network (space is expensive), but right now you and I can’t invest directly in Starlink.

So what’s the story? What is Basenese pitching if we can’t invest in this company? We do finally get to the tease…

“Because the company is still private, you can’t go to the stock market and simply buy shares, like you could have with Tesla.

“Now, let me be clear…

“The writing’s on the wall:

“Sometime soon, Starlink may go public….

“But by the time you can buy Starlink’s stock on the public stock markets, the biggest gains will ALREADY have been made by the insiders….

“And that brings us to the great news I have for you here today…

“You won’t have to wait until it goes public to make a potential fortune from Starlink — because I’ve found a ‘secret backdoor’ that could make you up to 47x your money in the coming months!”

Ah, the good ol’ “back door!” We’re “in the know,” right? We’re connected, so we can walk around the back, through the kitchen, and get into the secret speakeasy? It feels kind of cool to sneak in the back, doesn’t it?

So what is Basenese’s metaphorical “back door” into Starlink? Here are our clues…

“In fact, this secret backdoor only costs about $5 to get started…

“And it works because of a “fatal flaw’ hidden in Starlink’s process…

“In fact, this ‘fatal flow’ is the only thing preventing Elon from rolling out Starlink RIGHT NOW…

“And according to my research, Starlink is spending ALL its time between now and the end of the year frantically fixing this ‘fatal flaw’ that’s holding it back…

“For us, however, it’s great news…

“Because we’re going to invest in the company that could fix this fatal flaw…”

What’s that “fatal flaw?” Is there something wrong with the way that beta test is going so far? I guess we probably shouldn’t jump the gun on that too much, since this beta test was only launched about a month ago, but Basenese thinks the weakness is the base station…

“The single missing piece to instantly dominate Verizon, AT&T, Comcast and the rest of the big internet providers…

“Collect his $1.32 trillion prize…

“And beam fast, cheap internet to your home…

“Is the technology for the home terminals themselves!”

So he’s teasing a company that could provide at least some of the technology for satellite internet base stations… and he shows a couple images of their products…

“…. our little company has already proven that its terminals can connect to satellite internet!

“What you’re seeing above is just one of the 1,200,000 terminals this tiny $5 per share company has already installed around the world! ….

“… this tiny firm already has the tech Elon needs for his ground-based terminals!”

And apparently they’re also ready to provide satellite internet access to aircraft…

“Just a short while ago, this tiny $5 firm became the first company in history to demo an “in-flight” working receiver for sat-internet in flight…

“The company reported…

‘Passengers were able to remain connected from the time they left the gate until the plane landed several hours later, including during takeoff and landing.’

“Point being — this company has the tech Elon needs to put his Starlink service not only on the roof of your home…

“But on planes across the world!”

So Basenese says this company “checks all the boxes for already having working receiver technology that… can plug-and-play into Starlink….”

And he also indicates that this means Starlink is going to want to buy this company…

“As I’ve been showing you, this tiny little firm trades for just $5 per share…

“Right now the whole company is valued on the stock market at just $300 million…

“Which is why this would be a “no brainer” takeover for Elon and SpaceX…”

So this is partially a takeover speculation… and, as is often the case, we get some breadcrumbs that are apparently leading to this secret connection:

“… smoke is gathering around Elon doing a deal with this tiny $5 company…

“See, earlier in 2020, Elon was set to cozy up with the CEO of this tiny $5 firm at an industry-wide satellite conference…

“Where Elon was set as the keynote speaker…

“And our tiny firm’s CEO was set to be a panelist.

“That puts Elon in the same room as our CEO….

“If you owned a firm that needed a very specific technology to succeed…

“And if you were in the room with the CEO of a tiny firm who could produce that technology for you…

“Would you talk about a partnership?”

And then, of course, Basenese provides some examples of quotes from anonymous people in internet chat rooms that indicates a deal is likely…

“… word is just starting to leak out on the edges of internet rooms about potential partnerships between the two firms…”

And yes, he calls those out-of-context comments he pulls from various space and investor discussion forums about a potential partnership between these two companies the “smoking gun proof.”

Stop laughing! Come on, now, you know that everything speculated about in internet discussion forums turns out to be true! Bigfoot told me so!

So no, there isn’t any real “proof” here, and I’d say those smoking guns aren’t even warm to the touch… but that doesn’t mean it can’t be a rational investment, just that we have to discount the hype before we can look at it seriously. So who is it?

Well whaddya know, this is our old friend Gilat Networks (GILT).

Gilat is an Israel-based satellite ground station company, and yes, “in-flight connectivity” is a big part of their business, and they’re pioneering electronically steerable antennas (ESA) for use in jetliners. That’s actually been a bit of a challenge this year, since cruise lines and airlines haven’t been investing a lot in satellite connectivity this year, but it does seem likely that their market will grow.

We covered Gilat earlier this year when they were teased by the Casey folks as the “$10 master key” for 5G, and I later owned the shares myself for a while because I was speculating that their merger deal with Comtech (CMTL) would go through (it didn’t, and GILT became my personal “Turkey of the Year” as a losing position). So this company isn’t brand new to us… and it is indeed possibly well positioned as a future beneficiary of growing satellite internet connectivity around the world.

That doesn’t mean Gilat is partnering with SpaceX. They might be, I have no idea, but Tesla and SpaceX have also often been known for developing their own technologies and hardware, and right now SpaceX is apparently designing and building its own ground stations. Tesla and Gilat did both have a presence at the Satellite 2020 Conference, with Elon Musk as the keynote speaker, but we don’t know if Elon Musk and Gilat’s executives had any connection there.

Gilat’s story has been dominated this year by the failed merger deal with Comtech, and those disputes have now been settled, with Comtech agreeing to essentially pay a $70 million breakup fee, most of which is being paid out by Gilat in a couple special dividends to shareholders (36 cents/share is being paid this week, to shareholders of record on November 12, and another 50 cents or so is planned in the future if the court approves)… so they’re on their own. I suppose they could get overtures from SpaceX, but there’s no real indication of that in the public realm that I’m aware of, and there are a lot of companies who can design and build base stations for satellites.

Here’s a little more of Basenese’s forecast, just so we have something to remember it by when we look back on this in the future:

“First, it’s likely Elon won’t buy this company until he places a test order for its new terminals.

“So, for our first financial model, let’s say Elon kicks an order to this tiny $5 firm for just 1,000,000 terminals…

“(*** Remember, Elon ALREADY has approval from the FCC for 1,000,000 terminals! ***)

“At a convervative $250 cost per terminal, we’re looking at $250,000,000 in revenue to this tiny company…

“That means projection #1 is a near instant 95% revenue surge for this tiny company!

“Now remember — Elon knows 1,000,000 terminals is a drop in the bucket when it comes to taking over the whole internet…

“With more than 128,000,000 million households in the U.S. alone, he’s going to need way, way more than one million terminals…

“And that’s why he just asked the FCC for MORE approvals… up to 5,000,000 terminals!”

Gilat is working to at least some degree with all of the major LEO operators, they said in their investor presentation at the beginning of this year that they were “engaged with several NGSO operators: SES/mPower, Telesat, OneWeb, SpaceX, and Amazon.” (mPower is a “medium earth orbit” satellite constellation”, Telesat, SpaceX, Amazon and OneWeb are the major planned and in-progress LEO constellations). What that means for Gilat’s business in the near term, we don’t really know yet.

Probably the best way to get a sense of where Gilat stands today is by checking out their last quarterly conference call transcript from early November — they’re optimistic, particularly about their new government deals and their work with electronically steered antennas for aircraft (the photos of their latest product are in Basenese’s ad, for more confirmation), but the business tends to move more slowly than investors expect. A big part of the rationale for satellite connectivity right now is in building new backhaul to support 5G networks, for example, and Gilat noted in their call that even this business, which is presumably further along than Starlink and the competing LEO satellite constellations, will take a couple more years to really have an impact on their income statement.

So sure, SpaceX could decide to buy Gilat… but I assume any such decision would be based on SpaceX feeling that its own ground station technology is inadequate or can’t be built fast enough, and I haven’t seen any indication of that (and Gilat also gets some benefit, particularly from the perspective of their important Russian and Chinese customers, by being an Israeli company, so being acquired by a high profile US firm might hurt the business, too). Doesn’t mean it won’t happen. Basenese also hints that he thinks if SpaceX doesn’t buy Gilat, someone else will — maybe Jeff Bezos for his Blue Origin project and his expected competitive satellite constellation, maybe OneWeb itself.

Yes, that’s the same OneWeb that was the first leader in this LEO space and the focus of all those Ray Blanco teases about “Halo-Fi $7 satellite internet” in recent years… until they went bankrupt earlier this year, and he had to switch his marketing push to something he started to call “Apple Fi” instead. To be fair, OneWeb has now emerged from bankruptcy, with the backing of the British Government and Bharti Global, and they are aiming to restart their launch schedule by next month.

So how will all this play out? There was a good Bloomberg Businessweek article in September on the challenges of these satellite projects, SpaceX’s Starlink is the latest leader but, even with Elon’s magic touch, it’s far from a guaranteed winner. The previous “early leader” in this space, OneWeb, was well-financed and had “first mover” status, and after they went bust in March OneWeb’s visionary founder, Greg Wyler, said, according to that Bloomberg article, that “it’s impossible for the space industry to keep pace with terrestrial network technology.”

Of course, it’s impossible to build an electric car that can go 500 miles between charges and become sexy and popular, too, but Elon did it… so you can’t count Starlink out, and SpaceX is certainly capable of raising the $10 billion or so it will cost to get this network built… but you do need to acknowledge that this is a multi-billion-dollar gamble to provide satellite broadband to the rural and unconnected corners of the world.

And if you want more perspective, this Medium piece is my favorite description of the Starlink project that I’ve read — it’s from last year, when the first satellites were launching, but it makes sense.

There’s a reason why Starlink’s initial service is called the “Better Than Nothing Beta” program — the most obvious and immediate appeal, as was the case for prior Low Earth Orbit projects like OneWeb, is in connecting the parts of the world who are not on the broadband “grid” — mostly rural areas with low populations. These folks have been able to get satellite internet for a long time, from traditional providers like Hughes, but that’s using big ol’ geosynchronous satellites, which means the data has a significant lag period — the data has to travel about 20,000 miles up to those satellites, instead of about 300-400 miles for the LEO satellites.

The real appeal is that using a huge network of small laser-linked satellites like Starlink’s (they’re apparently not laser-linked yet, they depend on base stations to connect them to each other, but that’s the goal), can effectively provide transmission speeds that are similar to fiber-optic networks, and do so without fiber having to be laid to your area. It won’t necessarily be obviously better for urban customers who already have lots of robust broadband options (and may not have a clear view of the sky), but it will dramatically improve the ability of rural and moving users to get high-speed broadband. So rural America, the hinterlands of Asia and Africa, the wilds of South America, maybe high speed broadband is coming over the next few years… and yes, maybe to you, too, motor home and airplane and cruise ship.

Given the hype around this and past satellite ideas, though, we should be clear in saying it’s not likely to be cheaper than commonly-available urban broadband connections, and it’s not coming to your phone, not anytime soon — to get a direct satellite connection you still need some surface area for an antenna that can target these fast-moving LEO satellites, you can’t have a little 1/2 inch wide device in your pocket bouncing a signal accurately to space. Maybe someday, but not in the next few years — Starlink is arguably at the cutting edge of this now, and their first working antenna has to aim itself at these fast-moving LEO satellites, and is about the size of a pizza… and is expensive and extremely complex. There will be demand for this, I’m sure, but those initial beta testers are spending $500 for the antenna and $100/month for service, we don’t really know how well it might work just yet, and SpaceX is still going to be losing a LOT of money on that for many years as they amortize the cost of this expensive launch (and maintain that constellation, which will probably be much less robust, in terms of individual pieces of equipment, than the gigantic geostationary satellite networks).

Maybe Gilat can design a better antenna for them, or can tune its base stations that are built into airplanes to the Starlink satellites, and maybe that’s good for Gilat’s business over the next several years… but Gilat has been a pretty steady business for a long time, with gradual declines in revenue for the past few years, and a real recovery and breakout is awfully hard to predict. And, of course, their business is taking such a big hit this year, with the pandemic shutdowns and the near-cessation of global travel, that Comtech, a smart and connected global satellite player, was willing to pay heavily to back out of acquiring the company just a couple months ago. Maybe Comtech made a mistake in backing out, and maybe Gilat will be the next great satellite equipment company… but it might be that the recovery takes a few years, too.

Gilat has been posting earnings of 30-40 cents/share most of the time in recent years, so perhaps that’s a reasonable target to aim for as they try to rebuild the business after a couple terrible quarters, and if they can get there then the stock is currently, at $6 a share, valued at roughly 15-20X “normal” earnings. Not an obviously terrible idea, but keep your expectations in check for any lusty takeover potential.

And Basenese does drop a couple other hints about exciting stuff, including one other investment:

“Any way you slice it, the new space economy is potentially the biggest tech trend of the next decade.

“And I’ve found an exciting new way to own ALL thirty-one of the hottest companies vying for a piece of the profits…

“In one single move!”

That’s almost certainly a reference to the Procure Space ETF (UFO), which does indeed own many satellite and space companies… including Gilat, though as a relatively small company it’s not in the top ten holdings (GILT is about 3% of the ETF). There are plenty of other funds that are at least partially invested in space as well, including all of the aerospace and defense ETFs, but those tend to be dominated by well-known titans like Raytheon, Lockheed Martin and Boeing, and in any given year their performance depends more on US Defense Department funding trends than on any particular satellite constellation… even a hyper-ambitious one like Elon’s Starlink.

If you’re curious and want to look for other space-related stocks, there are some others as well — one place to go hunting is the Kensho Space Index, includes a few names that aren’t in that UFO ETF… like Aerojet Rocketdyne (AJRD), which is often teased as the key engine supplier for many of the rocket programs that capture our imagination.

And one final tease…

“And I’ve prepared all my findings on showing you how to do the same, too, in a third special report. It’s called:

‘How to Claim Elon’s StarLink Internet Before Everyone Else!’

“Now, there’s no guarantees here… I can’t say for certain that you’ll be chosen to test this internet…

“But I can say with 100% certainty that I can show you how to apply.”

Ummm, OK. I can tell you that, too, if you like — it’s super complicated. Here are the steps:

1. Go to Starlink.com

2. Fill out the form with your email address, and your physical address.

Annnnddd… that’s it. I guess if your physical address meets their requirements and they’re looking for more beta testers, they’ll contact you… if not, you’ll just be on their email list for updates. I’m sure that I won’t be eligible anytime soon, since we get fine broadband here in my little town in Massachusetts, but here’s what the response email said after I submitted my info:

“Starlink is designed to deliver high speed broadband internet to locations where access has been unreliable, expensive, or completely unavailable.

“Our Starlink team will notify you via email when service becomes available in your area, and keep you aware of general Starlink news and progress.”

Their initial beta service from these first 900 or so satellites is in the US and Canada, between 42-52 degrees longitude (or maybe 45-53, depending on who and when you ask), so the southern edge of that is about where I am in Massachusetts (or if you prefer, Milwaukee… or Twin Falls, Idaho), and the northern edge is near Edmonton, Alberta (or Moresby Island… the southern edge of Labrador, etc.). Plenty of people in those areas, for sure, though the vast majority of them live in cities or larger towns and are already wired for cable and probably get decent service. If you’re in that band in a rural area, though, and can’t get good internet service, well, maybe things are starting to look up for you.

And with that, I’ll leave you to your cogitating… ready for the Starlink revolution? Do you think Gilat will get scooped up by SpaceX or one of the other big satellite contenders? See big profits coming in the billiionaire-driven space race, or is there too much silly in this space already? Let us know what you’re thinking with a comment below — and thanks for reading!


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valdil
Irregular
valdil
December 1, 2020 12:58 pm

I lost on Insulat also a company trying to do the same thing. I think the govt wanted a piece of the action and the stock fell to nothing.

Dad
Irregular
Dad
December 1, 2020 1:21 pm

Does anyone remember GlobalStar. A network of low orbit satellites were going to supply internet to the whole world. I think they were eventually bought by the US Govt for 5 cents on the dollar and now uses the satellites for govt (NSA, CIA) only secure comms. At least, this is the conspiracy theory that I remember. I haven’t followed this story for many years. My opinion, AVOID GILAT like the plague.

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