This article was originally published in February 21, 2020. We’re still getting questions about it, the ad is still running and appears unchanged, and what follows has been lightly updated.
This is from an email I received from J.R. Butts, pointing at a teaser ad from StreetAuthority for his entry-level Top Stock Advisor newsletter ($39 “on sale” for the first year), a service I haven’t covered before …
“If you could buy a new Corvette today for $1,000, sell it tomorrow for $50,000…
“And pocket a quick, risk-free $49,000 profit…
“Would you do it?
“If you would, you’re going to love this opportunity…
“Because a major Wall Street ‘slipup’ means you can buy stock in a little-known satellite company at a price as much as 20X below its real value.”
So no, the newsletter ad copywriters haven’t forgotten that most newsletter subscribers are retired dudes who yearn for the sports cars of their youth… and they even manage to slip in some photos of the sexy Corvettes that get the heart of those folks to skip a beat or two on a cloudy February day.
But aside from copywriters using any excuse to slide in a photo of something aspirational (Corvette, yacht, etc.), what’s the ad about? Here’s the headline once you click through:
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“Former Wall Street Insider Reveals…
‘One Obscure Footnote is Your Key to Unlocking a $201,873 Windfall’
“REVEALED: How One Small Detail Wall Street Analysts Missed Could Add Six-Figures or More to Your Retirement Account… Starting Today”
And theres even that partially obscured “secret” document with the highlighted footnote to make it all seem every so official — though it turns out that the ad is mostly about satellite communications and spectrum, and the footnote they highlight is citing an appellate court decision (94 S.W.3d 163) reconciling some competing laws in regards to a personal injury case having to do with some oilfield workers (thrilling stuff… Negligence! Indemnification!). I don’t know for sure whether there’s some rational connection, or if they just made up the footnote, but the latter seems most likely — there are “footnote” specifics in global spectrum allocations that often come up with satellite companies, since they typically have to follow through to actually launch a service by a particular deadline in order to “hold” the spectrum they’re granted instead of just banking it, but I don’t see how those contractual agreements could have anything to do with this particular citation from the Texas Court of Appeals.
The profit story here apparently begins with a prescient acquisition… more from the ad:
“In late 2019, a little-known satellite company quietly purchased an Internet tech startup at a bargain basement price.
“How’d the stock market react to the news?
“Bupkis… no one cared….
“But this time…
“They missed something.
“They completely overlooked a detail so massively important, it could add $100,937… $201,873… even as much as $504,685 to your investment account in the next 12 months.”
Butts says that this “obscure footnote” could be worth as much as $10 billion a year for the satellite company he’s teasing us with… so that’s our mission today, find out which company it is and let you make your own call about whether there’s $10 billion hiding in there somewhere. Ready?
There’s always some urgency in an ad like this — after all, you wouldn’t sign up if it wasn’t urgent, right? We want to win NOW, not in five years.
And the argument is basically that this satellite company has a “hidden” revenue stream that could be $10 billion a year, and which the market isn’t “pricing in” — but that these missed opportunities don’t get missed for long, so the market is bound to catch up… though the urgency isn’t tied to a specific date in this case:
“How soon will it take for one of those ‘rocket scientists’ to discover the massive profit opportunity I’m hand delivering to you today?
“It could happen tomorrow… the next day… or a few weeks from now.
“There’s no way to know for sure.
“That’s why taking action today is the only way to be 100% certain you can stake your claim in this hidden gem…”
And this hidden revenue stream was apparently part of the acquisition this company made late last year…
“The satellite company I’ve been following paid a measly $26 million for the tech startup it bought in 2019.
“That’s an amazing price for the assets, intellectual property, and brand name it got in the deal.
“But it’s just a small fraction of what they received for their $26 million.
“The startup they bought owned exclusive global rights to not just one frequency…
But a huge slice of satellite communication ‘channels’ in what’s called the S-Band.”
And he says the S-band spectrum “channels” they own could support as many as five billion “smart devices,” and that they can charge the manufacturers of those devices at least $2 a year to communicate over their spectrum, which is where the $10 billion number comes from.
Which leads to some more clues…
“to a small company like our satellite firm…
“That has just under $2 billion in annual revenue today…
“An overnight increase of $10 billion a year is a HUGE deal.”
Well, it’s not “just under $2 billion” anymore, they’ve been slightly above $2 billion for over a year now when it comes to annual revenue, but this is clearly hinting at Echostar (SATS), one of the many competing satellite companies that’s trying to build a global network to offer seamless connection for Internet of Things (IoT) devices.
And yes, they did make an acquisition last year that brought them some rights to S-Band spectrum, in this case through a little bit of a back door move as they acquired little Helios Wire (yes, for $26 million) and almost immediately moved to launch the first inklings of a low-earth orbit (LEO) constellation to test their S-band network. Helios had filed for worldwide mobile satellite service through its Australian subsidiary (Sirion Global), which meant that they gave EchoStar the possibility of global coverage on the S-band which would help their competitive stance, since most of their current satellite network focuses on Europe.
That doesn’t mean they’ll have a network up and running and be offering a service in the next few months, but it does mean that in order to hold the spectrum rights they have to launch at least one of the satellites and operate the network — apparently the deadline for Helios’ filing with the International Telecommunication Union (ITU) is April of 2021, so they’ll almost certainly be beating that deadline (they intend to launch by the end of this year, or at least in the first quarter next year) to keep those licenses (which were the key reason for the acquisition, of course)… but how far they go to build out the network and actually offer services beyond that, and when, is still pretty much up in the air.
There are a lot of companies aiming to offer satellite-based IoT coverage, both existing satellite networks (like Intelsat, Iridium and Inmarsat) and the many low earth orbit startups (SpaceX, OneWeb, etc. — EchoStar’s Hughes division is making ground equipment for OneWeb and is a OneWeb investor, incidentally), and I imagine there will be a lot of coordination and communication in the next few years… as well, hopefully, as some international standard-setting to make sure these various networks and devices can talk to each other.
EchoStar is probably best known for its roots in satellite TV, but is no longer in that business — they spun off Dish Network (DISH) more than a decade ago and bought Hughes Network to expand their satellite services, and finally sold the last piece of their broadcast television business (back to Dish) late last year, to focus entirely on global and broadband satellite connectivity. Founder Charlie Ergen is Chairman and the largest individual shareholder of both Dish Network and EchoStar still, and I have no idea where his focus lies but DISH is also in the midst of some major upheaval and is a far larger company (they’re the buyer of the Sprint spectrum and assets that have to be divested as part of the merger with T-Mobile, and intend to build a fourth mobile network).
EchoStar reported earnings about a month ago (transcript here), and as in February the earnings report was not monumental, no real “shock” either way. They lost money, and the numbers for this year are tough to compare because of the spinoff of assets back to sister company Dish Network (including a bunch of satellites as well as some Echostar-owned assets that were primarily used for Dish television customers, like their call center), but they still expect to eventually be able to reinvigorate growth now that they’ve gotten rid of the shrinking satellite TV business and can focus on expanding their broadband business… perhaps including this planned LEO satellite network that’s just being started now.
Does that mean they’l have $10 billion in revenue next year? No, definitely not. There isn’t a lot of analyst coverage of EchoStar, but the likelihood is that they won’t even get back to $2 billion in the next year. Whether they’re able to build a meaningful global IoT data network on the S-band and boost sales in the future remains to be seen, that’s likely what they’re trying to do, but it will take years — and even if you discount the cost and challenge of operating satellite networks (which has, to be fair, improved with the new smaller satellites and variety of private launch companies), there’s a lot of competition angling to build similar global connectivity businesses using low earth orbit satellite constellations.
I have no idea how it will shake out with EchoStar in the year to come, but it’s certainly true that investor interest in satellites has not been this hot in years — just in the past few months we’ve seen newsletter teases from Charles Mizrahi for Iridium (IRDM) and E.B. Tucker for Gilat (GILT), to say nothing of the ongoing Ray Blanco “Halo-Fi” pitches about OneWeb that then morphed into something he called “Apple-Fi” (which hinted at Aerojet Rocketdyne (AJRD), EchoStar again, Virgin Galactic (SPCE) and likely Maxar (MAXR)), or the rising chatter about a possible SpaceX spinoff or IPO of Starlink, its planned satellite broadband company, or Amazon’s latest satellite ambitions, or whatever else.
Space is pretty hot these days, and the demand for global data has certainly never been higher, so maybe building satellite constellations won’t just be a money-losing project for billionaires this time around, but I can’t say I’ve got any real conviction about how the next few years will play out.
And so I’ll leave you there, dear friends — yes, Top Stock Advisor is teasing EchoStar based on the impending launch of its first couple of nano-satellites to test their S-band network and hold their ITU license, but by “impending” they mean “sometime in the next nine months or so”… and no, they’re not going to make $10 billion in revenue from those satellites in the next year or two. Whether the possibilities of that network and their existing satellite broadband services is enough to inspire you to invest, well, you’ll have to make that call. Please do let us know what you’re thinking with a comment below… love SATS, or have other favorite satellite stocks? We’d love to hear.