$ASTS: Markets & Psychology Redux

What I was saying before is that, poor growth companies, when rates do go up, which is what we've experienced with treasuries, right? So I think the five year hit a level not seen since 2007. There's like tweets continuously about rates, hitting levels not seen since whatever year. Yesterday, when CPI came in, hot, rates went up and then they started to come back down. And I think that's partially your reflection of, you know, risk, people adjusting for risk where treasuries also are a flight of safety, you know, asset. But then also, I think as some of these neocloud companies and companies in general that are focused on AI, as the cost of borrow for these specific companies themselves go up, their ability to finance growth starts to go down. And so perhaps some of the inflation that's been driven by this huge capex build out for data centers and all the like, maybe that starts relieving some level of pressure on rates, which also, you know, goes back to energy as well, which is, you know, oil has been, you know, driven by the conflicts and not only Iran, but now we've got Saudi Arabia. And then of course, you've got demand from data centers as well for carbon based energy and pretty much anything. So we're in a pretty interesting time right now. You know, I think for, you know, high growth companies, the cost of capital going up is not good. Equities, of course, also compete with yield invests, you know, for yield assets. So if treasuries are yielding five, six percent, you know, that makes them a more attractive investment potentially versus equity. And so you've got some shift in allocations there. And then of course with the cost of capital going up, valuations have to come down, right? So valuation multiples can press. And I think you're seeing that in NeoCloud companies are seeing that in space companies. I mean, you pick any sector, right? And so when it comes to investor psychology, it's difficult because, you know, what can you do as an individual investor or an institution for that matter, right? There's, you can provide feedback to a company. You can, if you're an activist of active investor, you can, you know, buy a stake in the company and try to rattle, rattle it for change threaten to run a slate of board members and do all these things, right? But for you and me, the thing that we can do is either buy, sell or hold, right? And then of course adjust your sizing. Beyond that, there's not much really you have, there's not much control that you have over your investment, right? You can either choose to participate, you can hold on, you can sell, you could short, and you change your sizing. That's pretty much it. And so it's extremely frustrating when you enter in a period where, like we are right now, where rates have gone up and of course, risk is getting taken down and there's, I talked about it this morning, that you have de-leveraging, right? And so people are de-risking because they have to. And someone had mentioned, you know, ASD had gone down to 39 and changed this morning. And that looks like an absolute, you know, de-risking somebody had a margin call, and that's when you have that, it introduces like a cascading effect, right? Where other people who are on margin two have to meet their calls and then you have this like vicious cycle, right? And so this morning, I think, and I'll talk to a little bit about RocketLab, but obviously RocketLab is down because of this delay in neutron. And, you know, I think for some people in, who own ASD for a select few people, they will be happy about that. Though they're like, oh, look, oh, RocketLab fell on their face. And vice versa too. There's like a small group of RocketLab people who love to take your crap on ASD whenever they can. The sad thing about these people is that, they don't understand what correlation is and crossholding is and the fact that both these companies are in large ETFs. So when you are putting down and hoping that, you know, you're fud posting about, you know, ASD or RocketLab, you're basically doing the service for your own stock because these two names are actually, there's quite a few of you that own both, whoever owns an ETF, it definitely owns both. And so if one of them goes down, someone is gonna, as a reaction in order to meet margin, if they're leveraged or just to make themselves feel better in terms of sizing, they may sell both or they might sell the other one, right? Might sell the other one and say, hey, I'm gonna buy more of whatever it's known. And so it's a pretty counterproductive exercise to do that. I never understood. And by the way, like I got a lot of criticism recently where people are like, oh, you're just like, not being critical enough of RocketLab. I was like, well, I've got nothing against that company. So what do I care? But yeah, I guess people are tribal and they want to, they want to see other people fail, which is pretty sad because I think for RocketLab, in particular, I hope they get new trun to the pad and I hope they get educated and so, because the more options are the better it is right for the industry. And so I don't take any pleasure in RocketLab having to do what's right, number one, you know, they've come up in, you know, come across a production issues which if you're dealing with carbon composites, which we all know, on the AST side, it's really tough. You're going to fix those issues, right? And you're gonna make sure that you do it right, hopefully the first time. So, but going back to what I've seen before, as an investor, you don't really have much control of having investment, right? And so this is why I present it all, trading and options is difficult because you can be right on your due diligence about a company, but then the macro can over one of the investment. So, like in this environment right now, what I say that one, you know, in the next call it six months is $133, a potential top, you know, as I had to level that AST could reach. Given everything that we know right now within macro environment, I think the odds of that are pretty low, right? But things can change quickly too, right? Where if, I don't know, it just makes things up like if the war in Iran ends and oil prices come down and the Fed decides to pause raising rates in AST, you know, they get T-mobile and they get a Golden Dome Award. A lot of things can go right, and maybe that is a possibility. But I think, you know, given the backdrop of where we are right now, and how people are dealing with risk and how fundamental advancements in news doesn't really change the game for companies at this point. Then I would say yeah, the near term upside is probably much lower than that, right? Because it's dependent on the environment. And that's why trading in options is tough because you can put an option on a head of point where let's say the stock is at 60 and you think, oh, 70 is a reasonable level. I'm gonna put on this option because I think there's some positive things coming on. And then rates go higher and entire sector gets derated and maybe the stock's at 40, right? And so maybe the upside from that level is 20%, but it's not gonna get you to where you did your options. And this is also, this was true for people who sell puts as well because it's, you know, I think everyone's like, well, you know, I'd be willing to buy a stock lower. But the question is like, why did they go lower, right? If there's a real fundamental issue of the company and it goes lower and it goes through your put strike, maybe you don't want to own the company at that level and or the environment becomes pretty rough. Maybe that's not a time to, you know, to take it on. And so yeah, there's some things to think about. And I think going back to investor psychology, what you don't have control over, you know, the ability to move the stock up or down or, you know, let's say, yeah, you don't have a board to eat it at a company then it becomes very frustrating, right? And people will get upset. And here, so let's put ourselves in the shoes of management. Like for management, they have the ability to obviously execute. They can make capital allocation decisions, they can make strategic actions, do M&A, they can do a ho-host of things, but they too are still under the influence of the market. Like I think ASD, when they had to raise money at, what was it, $5? In order to bridge themselves, that was $100 million where they, it was highly dilutive, but they had to bridge themselves from the Google, AT&T, Vodafone, you know, convert to get to the Verizon investment, which then, you know, changed the completely transformed the story. That wasn't something they wanted to do. Obviously the market was skeptical of the company. And so as a result, they had to do it. They had to make that tough decision. And I think it's important to look back, right? Like this company has raised a convertible debt with, you know, when the stock price was at in the 90s, like I think twice and then in the 60s and then, yeah, I think the most of the offerings have been obviously well north of where we are today. And I think, you know, the company got expropriated by investors that, you know, why are you guys raising money? I mean, me now looking back, I think God they did, right? Like they have over three billion in cash on the balance sheet where in this current environment, rates have come to go up, stocks have gotten deraided and thank God they raised money when they did. And these are hard decisions, like they're not as for, you know, for a bell who owns a significant amount of the company, taking on financing is not a decision to be taken lightly, right? Like they're obviously doing these things to go pursue growth opportunities and expand, right? And so, but yeah, but even the company is at the whims of the market. And so I think the reason why I mention that is that, yes, management has obviously much more influencing control over what the company is doing. But overall, if the market is, if we're in a bear market or an downturn, there's not much a company can do, right? Unless, of course, they sell themselves. They sell themselves and, you know, they get sold for $100 then, yes, that's obviously something that highly influences the price. But, you know, the company is not, and this applies to every company. No company is, and if they are, if a company is doing it this way, then you should probably not invest in it. But most companies are not investing, sorry, managing for a short-term pop, right? Like they're thinking about building long-term value and managing the company that way, right? And so, if you think about like most of these companies where, or at least where you have a founder who owns a significant amount of the company, they're trying to think about things for the long term, right? And so, they're not going to do something that's going to risk the company in the near term, or there, you know, I think there's been some criticisms where it's like, well, they're not, they're not executing or they like to us, or there's that other. Well, this is hard, and they're doing their best, right? And I think the issue where you come to an environment like this where any production or concerns, you know, launch, I mean, you name it any number of things. Like I think there's been some people wondering if legato could, the deal could get jumped by SpaceX, which, you know, I've been through bankruptcies and, you know, I was an M&A practitioner before, like there's no way you can break that deal. Of course, like, there could be a regulatory failure, if it gets blocked, which, you know, car has an indicator as such, or there could be other things. I guess you could, in a crazy world, maybe SpaceX could buy legato and just own the equity and just be the, in more to ASD, which from a department of justice and FCC perspective, that would get shut down immediately, because that doesn't, from a competitive standpoint, it doesn't make any sense. I won't go into the whole thing, but, but when you have periods like this where the stock price is down, it's going to introduce some level of, you know, peer uncertainty and doubt, right? And then you've got all these bears that come out of the woodwork and they're banging the drum, like, I was right, I told you so. And they introduced all these things that potentially could be wrong, right? And even yourself, right? Like you're, you're looking at a stock price and this applies to any stock price right now. I mean, last night I looked at some of the comments from people who were invested in rocket lab and it's like, oh, this all looks very familiar. It's the same. It's the same exact criticisms. In slightly different forms, but it's all the same, right? And so going back to what I've seen before, investor psychology, when you don't have an ability to control something except either by cold or cell, then as a coping mechanism, you know, when things are not going your way, you, people demand management to do more. Like, okay, these guys have the ability to do something. So I want them to send out more PR. I want them to execute faster. I want them to put the company up for sale. Do whatever it takes to get the price up, right? And so that's what we've seen over the last few weeks where people have been very upset and the perceived issues and real issues of a company become that much more acute, right? Because of the stock price being down, people want a fix now. They want it fixed right away. And for those people who've suffered in previous downturns, this is kind of the pattern that repeats, right? And when you have social media, it just gets amplified, right? Because then everybody's, before, as I've said, but when I was working, there was no social media. And so when things were going well, you would talk to your broker, you would talk to their hedge funds or funds and commiserate. But there wasn't really an outlet for that, for to be upset, right? Or, but now we've got social media where, and this is individual investors like you and me who, and there's quite a few people who are doing this for the first time.