Manward’s “Pre-IPO Opportunity of our Lifetimes”

Taking a look at the "6G Superstar" space stock teased by Andy Snyder

By Travis Johnson, Stock Gumshoe, February 10, 2021

The lead-in to the latest pitch from Andy Snyder touches on a few “hotter than hot” themes — so it’s no surprise that several folks have been asking about it recently. The ad is dated January 2021, and it promises both a next-wave telecom opportunity in 6G, and a hot exposure to Space, which is a wild investment theme of late as investors anticipate Cathie Wood’s next Space-focused ETF, and it’s somehow also a pre-IPO deal. What more could you want, right?

Well, I guess you could want a reasonable valuation… but we can be pretty sure that ain’t happening, not right now. So what is this secret 6G stock?

Here’s a little bit of the pitch for Manward Letter ($79/yr), to give you a taste — it uses the trickery of the “guess what I’m holding in this box, it’s gonna change the world” imagery to keep you interested…

“Take a look at this box.

“It contains a technology that’s about to blindside 5G, making it obsolete practically overnight…

“Launch a BRAND-NEW market that’s expected to rocket to $1 TRILLION over the next two decades…

“And give early investors in this opportunity a chance to multiply their money many times over as it does.

“I call this breakthrough ‘6G.’

“And it could trigger the greatest technological revolution of the century.”

We’ve heard 6G teased before, of course — there’s the “real” 6G, which is the next iteration of wireless, different projects in different labs around the world that will, assuming 5G goes like 4G and 3G and the other advancements, eventually coalesce around the next wireless standard that everyone uses in a decade or so, and that’s too far off for investment daydreams.

And then there’s Jeff Brown’s “6G,” which was mostly just a tease about how Amazon Web Services is the next dominant data platform in the world.

But the other big promises are all about new satellite-delivered data services — and this is another of those. It does have a twist, though, which makes it perhaps a more rational heir to 6G than the other LEO satellite constellations being deployed by Starlink and Blue Origin.

So which one is it? There are seemingly hundreds of little private fellas out there launching their own rockets right now, or building their own satellites or constellations of mini satellites, so we’ve got a bunch to choose from — here are a few of the clues dropped in the ad:

“Unlike 5G, which works only in major metropolitan centers, Wired magazine reports that this new technology… ‘Can connect to regular cell phones and provide high-bandwidth mobile data anywhere on earth.’

“It DOESN’T require hundreds of thousands of cell towers…

“Or risky radiation signals bombarding us day and night.

“Former NASA Senior Advisor Charles Miller says 5G provided only an ‘incremental advance’ and that 6G… ‘Is a bigger deal than 5G.'”

OK, so yes, that means we’re dealing with satellite-delivered communications. And probably a Low Earth Orbit (LEO) constellation, since the higher satellites can’t easily get past the latency challenges in providing real-time high speed voice and data transmissions.

And though this isn’t teasing either Elon Musk’s SpaceX (which launched its Starlink constellation and LEO-provided broadband service to test users a few months ago), or Bezos’ Blue Origin, those names do, of course, get dropped in the ad…

“… powerful names like Elon Musk… Tim Cook… and Jeff Bezos… are quietly rushing to get involved in this new 6G game-changing technology.

“Musk’s company SpaceX is putting in as much as $10 BILLION…

“While TechCrunch leaked news that Apple’s working on “an early-stage secret project” devoted to this technology as well….

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“And Jeff Bezos, one of the world’s richest men, just funded a wholly owned private research group focused 100% on 6G.”

But of course, when it comes to a newsletter teaser pitch there’s almost always “one tiny company” that’s a super-secret play on this trend, and that’s what’s promised by Snyder:

“While SpaceX, Apple and Amazon are all rushing to get a piece of this new technology…

“One tiny company has lined up the key patents….

“… its breakthrough will allow nearly 1 BILLION people to bypass the big cellular carriers…

“And access 6G directly.”

And some more big-name connections:

“6G has the chance to make our cellular connections more powerful in just about any location on planet Earth.

“And big partners – and I do mean BIG – are lining up to work with the one tiny company I’m telling you about today.

“In 2019 alone, this company conducted demonstrations with the U.S. Department of Defense… the Defense Advanced Research Projects Agency (DARPA)… and the Air Force Research Laboratory.”

There are also those patents teased…

“This company has secured FCC rights to the key frequency slots needed for 6G…

“And a patent on the critical technology powering it all.”

Here’s how he sums it up:

“The company is about to open up a whole new 6G world…

“To the 750 million phone owners who, at any given time, have ZERO connectivity because of where they live, work or travel

“To the 2.5 BILLION people who DON’T have phones, many because they lack access to affordable service

“To the existing 5.2 BILLION mobile phone users, who pay more than $1 TRILLION a year for cellular service

“And, as I’ll show later, to the growing number of people like me who worry that the powerful cell radiation used for 5G could do more harm than good.”

And the secret “Pre-IPO” stuff…

“… you won’t find this little-known company’s name on any stock exchange today.

“But I’ll also show you how to easily take a stake in this business… from any regular brokerage account… in less than a minute.

“That means you will be able to access pre-IPO shares… BEFORE this company becomes publicly traded for the first time ever… most likely within the next few months…

“… you could have had a shot at a life-changing fortune by getting a piece of this business yourself…

“Starting with as little as $20.”

So what’s our little space darling here? There are actually two different plausible answers for this, satellite companies that are on the verge of going public through a merger with a public company — one a SPAC, one a more “normal” reverse merger.

The SPAC one is New Providence Acquisition Corp (NPA), which is merging with AST & Space to bring that company public under the name AST SpaceMobile, largely with the goal of commercializing their SpaceMobile technology that aims to use a Low Earth Orbit network to essentially provide high speed “roaming” connections for folks who aren’t close enough to a cell tower to get a signal (mostly folks in rural areas, which is the target market of most satellite broadband providers as well — SpaceMobile’s “trick” is in providing connections directly to mobile phones rather than to base stations, so a specialized satellite phone or a fixed broadband dish antenna like those used by SpaceX’s Starlink service is unnecessary). That deal was announced in December and will presumably close in the next few months, you can see the Investor Presentation here.

But that actually doesn’t look like it’s our match today — because we also get into some specific hints about the testing they’ve done, and about the patents and the focus on ka-band spectrum…

“Successful tests of the technology’s effectiveness… even in far-flung locations… are coming in…

“From everywhere from the Falkland Islands in the middle of the Atlantic…

“To northern Canada…

“To Australia and beyond….

“This company has secured FCC rights to the key frequency slots needed for 6G…

“… it’s locked up priority rights to the Ka transmission band with the International Telecommunication Union.

“And a patent on the critical technology powering it all…. United States Patent Application 20190181946”

And a quote about early testing with Telefónica…

“Just weeks ago, the 6G Superstar wrapped up testing with Telefónica Group, one of the world’s largest telecommunications companies.

“Check out what Telefónica’s satellite business director had to say…

‘Across every application tested, their LEO delivered an outstanding performance, with significant improvements over what we can achieve today.'”

And, finally, this bit from the order form about what he calls the “6G Superstar” …

“‘The 6G Superstar’ is poised to start delivering high-speed satellite communications everywhere on Earth… to up to 4 billion new customers.

“It’s already inked deals with divisions of Amazon, Google and many other power players.

“In this exclusive dossier, I reveal its name, how to invest in it through its parent company, and ALL the reasons I expect it to skyrocket, starting with the expected IPO just months or even weeks from now.”

So given those specifics, the Thinkolator sez Andy Snyder must be teasing the second plausible match — an existing space company (not a SPAC) that’s merging with another LEO satellite hopeful, so today it looks like we’re being pitched Loral Space & Communications (LORL), which is merging with a company that they already had controlling ownership of, the Canadian satellite company Telesat, which itself has been working on the preliminary steps to build a LEO satellite constellation for several years. And yes, LORL shares have soared higher in recent weeks too — everything space-related is in a bit of a mania these days.

Both AST and Telesat/Loral are interesting, so let’s take a little look at AST SpaceMobile first, which does not match the specifics (those are a clear and specific match for Telesat), but fits better with the theme of the pitch (supplying satellite roaming connections for regular cell phones).

The big push for AST & Science, which is planning what they call the SpaceMobile network, is to provide satellite-based broadband directly to cell phone users who are out of reach of a cell tower, and to do so without requiring mobile phones to have a special chip or antenna — so everyone who has a phone today could be a potential customer (indirect, though, their real customers are the mobile telecom companies).

The goal, they say, is to launch their initial service with an equatorial constellation of satellites to provide coverage to some areas within the next few years, with the first wave of commercial service expected in 2023 with 20 satellites covering a band that includes parts of Africa, Latin America and Southeast Asia, and to go almost global later with a total of 168 satellites rolling out to increase the coverage area (they’re projecting 373 million subscribers by 2027). Those numbers have shifted around a bit.

That sounds like a very, very small number of satellites in the context of recent high-profile stories, by the way — SpaceX’s Starlink broadband LEO constellation has close to 1,000 satellites launched already to provide their initial coverage, and intends to reach about 40,000 satellites for global coverage. I have no idea whether or not global coverage direct to mobile phones using existing 5G/4G frequencies and existing phone hardware is actually feasible for AST & Science, but they seem confident… even though they’re still kind of secretive about how it actually works. The indication is that unlike most LEO satellite companies, who intend to launch thousands of very small satellites that will network together to create wide coverage, AST & Science is actually launching a smaller number of large satellites into low earth orbit. Which stressed out NASA.

This is from their FAQs:

“With over 750 patent claims, the technology is highly proprietary, and exactly how it works cannot be disclosed. We can say that our engineers have designed an entirely new form factor and deployment method that we anticipate will significantly reduce the time and costs associated with manufacturing, launching and operating satellites.

“Leveraging proven technologies, ultra-powerful SpaceMobile satellites will provide 2G/3G/4G LTE/5G and NB-IoT connectivity to standard mobile phones and IoT devices.

“Our team also has worked – and continues to work – closely with mobile network operators and regulators to ensure compatibility with today’s wireless networks.”

They are intending to launch as a wholesale service that’s really sold by the telecoms — theirs would be as an add-on “opt in” service kind of similar to how some providers handle international roaming now, selling “day passes” that can be facilitated by the big telecom companies, starting with partners Vodafone and AT&T but also including at least a half dozen other large mobile providers around the world. They expect the US and Europe to be their richest hunting ground for subscribers, not surprisingly, that’s where a lot of the money is, but they do say that their average revenue per user for the global network should be $2.15 per month by 2027.

This all sounds very ambitious, but I guess ambition and lofty goals are important for tech companies who are trying to create new markets, even if they sound maybe a bit implausible (see: Musk, Elon) — they say they’re going to assemble and test their first satellite this year, and launch it in the second half of 2021 (though they did launch a test nano-satellite, called BlueWalker 1, in 2019). Their materials do look impressive, and I guess the key to those satellites (and the reason they’re large enough to worry NASA) is that they are very powerful, which huge solar collectors. The company has responded to NASA’s concerns about traffic jams at their orbit, which is higher than the Starlink orbit and higher than stuff like the International Space Station, but kind of in a sweet spot where lots of other critical media and weather satellites can be found… but I don’t know what the outcome of this will be. Their next satellite intended for launch later this year, BlueWalker 3, is technically still not the final design, it’s half the size of the full SpaceMobile satellites they’re planning, so it sounds like it’s going to be at least a year before their real commercial SpaceMobile satellites even have a final design.

I get a little frisson of skepticism when reading all this, but, well, I got that same feeling when Elon Musk promised fully autonomous driving by 2017, too, and he’ll probably get there eventually… I guess it’s fair to say that overpromising and having a “shoot for the moon” mentality is part of getting there. If people who calculated the odds were in charge of a lot of these projects, they would never go anywhere.

The way they model it out with their early service provision, the growth will be pretty startling — $181 million in revenue in 2023, jumping to a billion in 2025 and $2.6 billion in 2025… and almost $10 billion in 2027. The SPAC transaction will fully fund the launch of their first 20 satellites, they believe, and they think their 50/50 revenue share deals will mean that their revenue comes in with very high margins, particularly as future satellite costs come down, so they’re pitching this deal as providing $130 million in EBITDA in 2023 and $2.5 billion in 2025 (“D” is a big number in those income statements, we should note, which is why that number jumps positive so fast — depreciation for satellites is huge, and at that orbit they probably have to be replaced every ten years or so).

And, of course, everyone is all excited about space now… and this one has gotten a lot of attention, both because of all the Elon Musk/Starlink action and because of Cathie Wood’s expected Ark Space ETF and the sexiness of SPACs, and we can add on Andrew Left at Citron pouring some fuel on the fire yesterday with this tweet, which brought another jump in the share price:

Those three companies are “Space SPAC” stocks, in case you’re wondering, but aren’t direct competitors to AST & Space — STAC is the Stable Road Acquisition SPAC, they’ve agreed to merge with Momentus, which is a company that wants to launch space transportation services (moving satellites, removing space debris from orbits, etc… HOL is Holicity, a SPAC merging with Astra, which is a new rocket company aiming to provide launches for small satellites… SPCE is, of course, space tourism company Virgin Galactic, which came public through Chamath Palihapitiya’s first SPAC and really helped to ignite both the Space and SPAC sectors a little over a year ago.

So at $22, this is a company that today would have a market cap of about $4 billion after the merger. If they can reach those targets, it’s certainly more rationally priced even at $22 than a lot of the wilder SPAC stories, but that is still, of course, a bet on the future. They like to use “Projected 2024 EBITDA” as their baseline, since that’s about $1 billion, so you’re only paying 4X that level. Better than some, but still, that’s four years away and, not knowing anything about this company or its deals, I would assume that the safer guess is that they’ll be slower to reach that level of revenue and earnings than they are currently projecting. It’s clearly better than some SPACs when it comes to their potential cash flow over the next few years… but, well, that’s not saying much. They do have some pretty strong partners and early investors, including American Tower (AMT), Vodafone (VOD), Rakuten and AT&T.

Snyder ties this in with the health concerns a lot of folks have fretted over when it comes to 5G — which seems silly, if their system can use existing phones then that means it’s using existing radio frequencies, I don’t see how receiving those frequencies from a constellation of satellites is better than receiving them from a network of cell towers. He also talks up the possible Apple connection, as folks have been doing for a year or so with almost all of the satellite-related stocks,

And how about what must be the actual match for Manward’s tease? Loral Space and Communications (LORL) announced in November that they will be merging with Canada’s Telesat and changing their name to Telesat, with the deal probably closing by midyear (assuming regulatory and shareholder approvals). Telesat had been rumored to be pursuing an IPO, partly to help fund the $5 billion they’ll need to build out their LEO satellite constellation, but they were also already majority owned (about 63%) by Loral, so that reverse merger into what is effectively a shell at Loral now is, I guess, cheaper or easier.

And so far it’s working, the restructuring and clearer focus on the Telesat business, which was already Loral’s biggest focus after they sold their satellite manufacturing business, has helped to drive the shares higher (Loral’s only other real business, currently, is their 56% ownership of XTAR, which is a consortium that owns two military/government band satellites and is planning two more).

And that higher share price will be important, because the new Telesat already has quite a bit of debt and will need to raise a bunch of money, presumably at least some of it in equity, to launch those Lightspeed satellites — they announced a contractor decision just yesterday, so we now know that Thales Alenia Space got that $3 billion order (Thales Alenia is one-third owned by Leonardo (LDO.MI, FINMY), which we’ve covered before, and 2/3 by Thales (HO.PA, THLLY)). That’s a big order, 300 LEO satellites for Telesat, and they say to expect the first launches coming in early 2023 and initial service available to the “higher latitudes” in late 2023, followed by global service the next year (add on the launch costs and other expenses, and you get to the $5 billion that is often cited as the total cost).

I have not seen any easily digested “pro forma” details yet about the combined company and its balance sheet, but Loral goes into it without debt and having paid out most of its excess cash in a special dividend in December, and I would expect some really large share offerings soon after the deal is completed. Telesat goes into this with a profitable existing business that seemed to me to be pretty sustainable but unexciting, and a meaningful backlog of orders, and with about $1 billion in cash and $3 billion in debt.

But we should also note the disconnect with the marketing hype — Manward is clearly teasing Telesat/Loral with all of the specific clues, and that’s a much more reassuring and established business than AST SpaceMobile… but Telesat is not going to be delivering Ka Band satellite broadband directly to regular mobile phones. Their service, while it uses a different strategy than SpaceX’s Starlink or Amazon’s Project Kuiper (both of those are constellations of thousands of small satellites in LEO, Telesat will have about 300 larger satellites in a somewhat higher LEO orbit), will, like those more high-profile projects from Elon Musk and Jeff Bezos, require a satellite-ready antenna of some kind on the earth end of the connection.

Starlink is focusing on providing high-speed broadband to consumers in rural areas who can’t get fiber connections, Telesat’s Lightspeed is focusing more on the “business to business” sector, supporting the same kinds of businesses who have been Telesat’s commercial satellite customers for years (broadband coverage for ships at sea or for airplanes, for example) but also has the creation of rural connections as a key driver (broadband delivered to fixed base stations in small towns in Canada, for which they’ve gotten a lot of government funding… either to single facilities and homes or to a base station that re-distributes the signal via either 5G or WiFi6, since LEO constellations can provide backhaul for cell phone data that’s roughly as fast as fiber-optic connections, important since fiber is very expensive to extend to remote areas).

So to be clear, that dream of “your phone seamlessly roams everywhere with satellite backup” is not part of Telesat’s Lightspeed business — it can certainly improve mobile networks, but it won’t be a direct mobile network extender like AST SpaceMobile.

Who’s gonna make the money from all of this satellite stuff over the next ten years? I have a hard time guessing at that. The several teams trying to rapidly build out LEO satellite constellations are all pushing their infrastructure builds out as fast as they can to try to build a business, but there are a lot of hypotheticals when it comes to what the revenue will look like from these complicated businesses five years from now, who might have “won” when it comes to market share among consumers, or among governments who are trying to subsidize rural broadband or businesses who really need these improved services, like airlines, cruise lines and shipping companies. It’s all really quite cool, but the fact that pretty much all space-related stocks have doubled in the last month does a lot to quell my interest in chasing an investment in any of these capital-intensive satellite hopefuls. The ones that have a clear valuation argument on their future projections, like AST SpaceMobile, also seem to leave a lot to be desired when it comes to regulatory approvals and disclosures… and the ones who have a clearer path to funding and building constellations and a history in the business that inspires a little more confidence, like Starlink or now Telesat, are not terribly clear about the future profitability potential.

I won’t be buying any of these, I’m a little too scarred from watching 20 years of satellite companies shoot billions of dollars into the air and going bankrupt, but perhaps this next generation of LEO satellites will create fantastic new broadband coverage and create a new wave of exciting space businesses for those who are brave enough to invest early, when the financial prospects are very uncertain. That’s your call to make… it is, after all, your money — and I hope you’ll share your thoughts on the whole magilla with a comment below. Thanks for reading!

P.S. that pitch for the Manward Letter also includes ten or so other hinted-at satellite-related ideas in addition to the “most lucrative technology in America” spiel for this “6G Superstar” that’s the primary focus of the ad. If there’s interest in more of these speculative ideas, I’ll try to dig into some more of them in a future piece… or if you’ve got other space-related companies that you think are worth a gander these days, please do shout ’em out with a comment below.

Disclosure: of the companies mentioned above, I own shares of Amazon. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.

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