by Travis Johnson, Stock Gumshoe | September 18, 2018 1:01 am
“On October 1st, This Weird Rooftop Pod Will Deliver the Death Blow to ‘The Big 3’ Cable Companies… With One Clean Shot”
That’s the opener of the latest ad for Ray Blanco’s Technology Profits Confidential, which is selling subscriptions with the promise that you can get rich and shut down America’s most hated companies at the same time. So what’s he talking about with this tale that you can “turn a single paycheck into $110,661 when America’s most hated monopoly finally goes six feet under?”
He doesn’t mention what kind of paycheck we’re talking about, of course, whether it’s $1,000 or $40,000 that turns into $110,000… but he does in several places talk up what “could” be a 5,349% windfall.
And yes, you’l note that up there it says “October 1st” — that’s what the promised date was for the start of flowing riches the first time Ray Blanco teased this investment idea. October 1, 2017. Lately he has re-circulated it with the “December 7” pitch, then “March 31st” as the year turned to 2018, and now ,though the ad is still signed “September, 2017,” the due date teased in the headlines is now September 22, 2018 for this “death blow.”
The argument, essentially, is that this secret company will be going public soon and you have to get in now if you want a piece of the riches — first to buy someone who has invested in that company, second to actually buy the stock at the IPO whenever it comes.
The rest of this article is old, I’m afraid — I haven’t changed much of what follows, it’s still what we told you back when he was teasing this same idea back in October of 2017 (the ad hasn’t changed much, either, to be fair, they’ve mostly just updated the dates). I’ve added a few little updated notes throughout, but most of what you’ll read below was first published on October 2, 2017.
So where are these riches coming from? The short answer is “satellite internet,” which for many years has been the province of billionaires who are sick of having too much money.
But let’s get into the long answer so we can see if it’s clear which stock he’s teasing. Then, heck, maybe you’ll decide you’d like to risk a subscription… that’s your call. But start out with some knowledge first — if you don’t feel like you’re buying a “secret” stock tip and you can go into any newsletter subscription with a little healthy skepticism and the ability to think for yourself, then you’re much less likely to do something
stupid risky once you get that “secret tip.”
The big idea is that several large companies are backing a low-earth orbit constellation of satellites that could deliver broadband-speed internet to areas of the world that aren’t currently connected by fiber-optic cables. Here’s a bit more from the ad:
“… companies like…
* Virgin Group
* And even Coca-Cola
“…have poured nearly two billion into launching the specific technology I’m going to tell you about today.
“Even Fortune recently reported that following these companies’ lead is a way for main street investors to ‘win big’ right now.
“Because not only could this new breakthrough deliver faster, cheaper, reliable internet directly to your home…
“It’s also going to give you a perfectly solid connection in your car driving through the mountains… on your boat out at sea… at your cabin in the deep woods…”
Sounds good, right? I know my kids really, really, really want to have broadband internet in our car, taking away that one part of the day where they have nothing to do but read a book or listen to their parents (if they start putting wifi in all modern cars, as seems the trend, we may have to go back to driving our 1966 Oldsmobile full time… even the AM radio doesn’t work, they’ll have no choice but to absorb our parental wisdom).
So what is it that Blanco is pitching here? A solution to that “last mile” or rural customer is a big part of it — he brings up several examples of folks who can’t get broadband access because they’re out in the country, or just don’t have the right fiber optic cables in their neighborhood. More from the ad:
“Customers now using internet from the heavens have called it a game changer – clocking in at 12 times faster, yet 10 times cheaper than what they were forced to use before.
“Here’s the best part…
“Until now, the precursor to this extraordinary technology has only been rolled out to 15 countries around the world.
“But soon, it could replace dial-up, cable, DSL and even fiber in every city and town in America.
“Making the lives of virtually every American more affordable and far less stressful.”
The bad news? Ray Blanco keeps mentioning this
October 1 December 7 February 7 March 31 September 22nd deadline — apparently that’s the date by which you have to “position yourself” to take your share of the $251 billion internet market. So how is it that we’re supposed to position ourselves, assuming we believe that this arbitrary date is anything other than a “please get your credit card number out quick, don’t delay” deadline? (It isn’t, sorry.) Let’s get a few more clues from the pitch:
“A stunning breakthrough in something called ‘L.E.O. transmission’ is about to snap up most – if not all – of that hugely profitable market and make technological history.
“And at the center of it all sits a tiny, privately-held company that holds the exclusive legal rights to use their technology to connect every human on the planet – with the virtual flip of the switch.
“Not only will this company change the whole world’s perception of what an internet provider is, it is also poised to make investors very, very rich.
“Once they launch their breakthrough L.E.O. transmission project, they are poised to tap into an additional $35 billion of profit every single year – just in the US alone.”
That “Halo-Fi” refers to a network of low earth orbit (that’s the L.E.O. bit) satellites which travel far closer to the earth than most satellites and therefore get rid of the latency problem that has been a serious limiter for the speed of satellite-based internet — Blanco refers to them as “micro-routers” that circle the earth about 750 miles over our heads…
“It Takes Just Three Halo-Fi “Micro-Routers” to Cover an Area the Size of India.
“And to blanket the entire earth in high-speed internet?
“As this company is about to prove, it could take as few as 648 micro-routers.
“Then, once the switch is flipped on, receiving internet in your home is simple.
“No spotty modems. No outdated copper. No fiber.
“You don’t even need to buy an antenna.
“You’d simply need to be near a school, public building or municipal building that has a receiver on its roof and your phones and computers will automatically log on.
“Now, if you prefer, you can buy your own receiver for a one-time payment of about $200.”
So what they’re talking about is a company called OneWeb, which used to be called WorldVu. It was founded by Greg Wyler, who has long been a scrappy internet provider entrepreneur (driven by both profit and social missions, apparently — one of his biggest projects was wiring Rwanda for broadband), and his company now features some huge backers on its Board of Directors, including Richard Branson, Suni Bharti Mittal, and Paul Jacobs of Qualcomm, who all participated in OneWeb’s $500 million Series A funding round…. and it also received a massive $1.2 billion investment from Masayoshi Son’s Softbank (SFTBY), and, with Softbank’s help, nearly merged with Intelsat (I) earlier this year before that merger was squashed by Intelsat’s debtholders.
But OneWeb is, as Ray Blanco notes, private. That means it’s not publicly traded or listed on a stock exchange, and you and I can’t invest in it (at least not directly or easily). So what’s the story with this investment tease? More from the ad:
“Launching this company’s entire constellation of micro-routers – including a network of receivers on Earth you can automatically log on to – is expected to cost just $3.5 billion.
“So not only are we talking about the most reliable internet the world has ever seen…
“We’re also talking about possibly the least expensive way EVER to launch it.
“Which, by my cost analysis, will then translate into a monthly charge of no more than $7 a month for users just like you.
“Which means we’re really talking about…
“A fundamental shift in the history of the internet itself.
“And my intelligence points to October 1st as the day this private Halo-Fi company begins the process of going public on the stock market.”
OK, so that’s part of it, there’s some plan to begin the process of going public, and for some reason Blanco’s intelligence points to
October 1 December 7 as the day that process begins. But he’s not just talking about buying this stock if and when it goes public…
“But here’s the catch…if you want to claim those gains for yourself, you have to take action BEFORE
October 1st… I mean December 7th February 7.
“Because I’ve developed a ‘one-two’ profit punch” strategy to capitalize on this world-changing technology before AND after it makes its way onto the public markets.
“It’s a simple strategy…one that could make you a cool six-figures before the year is out.”
What else might be causing this “rush” for a company that already has a $1+ billion investment from Softbank for a project that in its entirety, according to Blanco, will only cost $3.5 billion? Apparently there’s a deadline:
“… in 2012, the CEO of this company successfully secured the global rights to operate his Halo-Fi technology exclusively within the ‘microsatellite band’ of space.
“Under the first-come, first-serve ITU rules that govern the deal, if this company can get their microsatellites operating any time before the end of 2019, they have the sole rights to operate inside this band.”
That’s not necessarily the full story, Wyler did get hold of the previously failed Teledesic’s spectrum rights, which were first granted well over a decade ago (Teledesic was a previous low-orbit internet satellite constellation company that failed, despite big backing from Bill Gate, Craig McCaw and the Saudis, and stopped work in 2002), so these projects didn’t begin just in 2012… though Greg Wyler did indeed file first with the ITU, and that is indeed a “first-come, first serve” license that requires OneWeb to get their satellites up by 2019 to claim that spectrum and license and force everyone else (if anyone else proceeds with actually building a constellation) to work around their spectrum or cooperate with them.
That “first place” position has helped Wyler get all this funding — it was after that license that they got their big Series A funding back in 2012, and since then other big partners have reportedly been sniffing around, including a possible deal with Google that didn’t materialize and, more recently, the big Softbank investment. It also almost led, reportedly, to a possible partnership with Elon Musk’s SpaceX — though SpaceX seems now to be more of a competitor than a collaborator, and OneWeb is planning to use Branson’s Virgin Galactic and the New Glenn rocket from Jeff Bezos’ Blue Origin to launch its satellites (instead of SpaceX).
There are other not-very-well-known projects who have registered with the ITU beyond SpaceX, too, all of them essentially getting in line to stake their claim on spectrum and satellite slots in case OneWeb misses its deadline (or with the assumption that they’ll be able to coordinate with OneWeb’s spectrum claims) — most of those projects began their filings a little under two years ago, right after Google and SpaceX got a lot of press coverage for their satellite ambitions. Back in 2016 we even saw a teaser pitch for an Aussie company that was pitched as “critical” to SpaceX’s satellite internet plans, so this story is out there in the investing world. (That pitch was about space junk and the risk it poses to satellites, incidentally — and the stock has done pretty well, though the connection to SpaceX is obviously quite tenuous.)
But still, the fact remains, OneWeb is private. How does one invest in it?
Assuming you want to, of course.
Well, if you want to invest in it before the “maybe someday” IPO, the only way to do that is by buying shares of one of OneWeb’s publicly-traded backers that participated in one of their venture funding rounds. That would mean Qualcomm (QCOM), Airbus (EADSY), Coca Cola (KO), Hughes Network Systems (Echostar), or Intelsat (I)… or, of course, Softbank (SFTBY) itself, though Softbank’s investment in OneWeb, large though it is at well over a billion dollars, represents only about 1% of Softbank’s market cap (Softbank may be a fine buy if you like Masayoshi Son’s decisions, but its prospects depend far more on major investments in Sprint, ARM Holdings, Uber, Alibaba, Didi Chuxing, NVIDIA and others than they do on OneWeb’s success or failure).
Either that, or you could participate in the idea of OneWeb’s mission by buying one of the other possible partners for OneWeb now that the Intelsat deal has failed (it was scrapped in June, mostly because bondholders wouldn’t accept the massive writedown offered by Softbank, but most people seem to think that OneWeb would do better if it collaborated with an existing satellite company) — those other suitors would presumably be the other major commercial satellite fleet operators like Telesat (half owned by Loral Space (LORL)), Gilat (GILT), Iridium (IRDM), Viasat (VSAT), Orbcomm (ORBC) and Echostar (SATS).
If those are the choices you give me, I’d be most inclined to take Viasat (VSAT) or Echostar (SATS) seriously, though Qualcomm (QCOM) is certainly the one that has the most reasonable valuation and is clearly a fine buy as long as the Apple dispute doesn’t completely destroy their royalty revenue in the future (that’s not at all guaranteed, unfortunately). VSAT has been one of the largest holdings of Seth Klarmann’s Baupost, which is a pretty strong vote of confidence, and SATS has both an ownership stake in OneWeb and a compatible consumer-facing business that’s profitable and growing earnings (and it’s also a supplier to OneWeb), though it certainly ain’t cheap. Intelsat has been the biggest winner in the group since Blanco’s pitch began, but that’s not because of LEO or OneWeb, it’s partly because their financials improve a little and, story-wise, because they became a market darling this Spring following some talk of regulatory adjustments by the FCC, mostly because Intelsat uses some of the frequency bands (C-band) that might be used for 5G.
I have no insight into who Softbank might pursue in Masa’s plan to consolidate OneWeb with an existing operator, or if they’ve given up on that now and will go public instead someday… but those are decent companies that are worth a look and are small enough (VSAT and SATS, at least) to see a significant economic impact from this planned satellite constellation. Airbus seems most economically involved in OneWeb’s actual operations, since they’re OneWeb’s partner on their satellite-building factory in Florida, but Airbus is one of the largest space companies in the world in addition to being the second largest aircraft manufacturer, and OneWeb’s little project won’t make much of a dent on their income statement.
As to whether OneWeb itself will be worth an investment once it becomes available in an IPO, that depends, of course, on what the valuation is. (And it doesn’t necessarily have to happen — there’s likely abundant private capital out there for a tech company like OneWeb that’s run by a charismatic founder and has a gold-star board and a sexy space-related mission. The Intelsat merger would have effectively brought them public without an IPO, and that could also happen with some other partner.)
There’s no rush on that front, though, not unless you’re hurrying to fill up the subscriber rolls for your newsletter like Ray Blanco seems to be — OneWeb (or WorldVu, if they keep using that name with the SEC) has not filed an S-1 or otherwise given any indication that they’re on the verge of an IPO. And they shouldn’t be in dire need of capital, they don’t have the full $3.5 billion that they say they’ll need to be up and running with their satellite constellation, but they should have roughly half that amount, which presumably is plenty to get a launch or two and some “proof of concept” in place and meet that 2019 deadline. Though that deadline is getting a little tighter now that their first launch has been pushed back (it was supposed to come in March 2018, now it’s targeted for somewhere between December 2018 and February 2019).
Satellite internet is an appealing idea, though the notion that it can replace fiber optic connections or next-generation wireless with comparable speed and cost remains pretty untested — and satellite networks are, even in this age of billionaire-funded private space companies, awfully expensive to build, deploy and maintain. To add to the challenge, the problem they can most feasibly solve in the first wave, as OneWeb is attempting, is delivering internet access to rural areas — and those are not areas that are typically flush with wealth, so without government incentive, frankly, that’s not necessarily a very lucrative problem to be solving (rural = not so many customers… so, assuming such a service ever actually launches, they’ll be losing money unless they’re charging a heckuva lot more than $7 a month).
There’s a reason why so many satellite companies have had balance sheet problems (like Intelsat), and why the pursuit of private space flight requires billionaires to open their own wallets — space is difficult and expensive. The mission of OneWeb is much more about reaching the currently unreachable with broadband internet, it won’t likely disrupt current broadband customers or offer them a cheaper option, but it might be able to bring broadband to rural areas… like rural Alaska, which is the target Greg Wyler has spoken of recently. Bringing viable competition to areas that are already served by broadband, (or even by 5G wireless, which will probably develop much more quickly than satellite internet), is much less feasible in the short term (next five years).
December 7 February 7 March 31 September 22 stuff in the ads, though, is extremely unlikely to be significant. This will not be a moneymaking enterprise anytime soon, and it will require a lot more capital over time to build out that constellation and their ground facilities (though they’ve raised more than $1.5 billion privately already, so they’ve got a good start).
They might go public at any time, of course, but they haven’t filed and I would assume that there’s no reason to panic about “getting in early” — an investment in Softbank or Intelsat or Echostar here won’t give you a whole lot of exposure to OneWeb, and with a company that has a business mission and a massive capital investment ahead but no clear economic trajectory to profitability, there’s every chance that they’ll go public to raise some money at some point in the next year or two to raise money but not actually shoot higher post-IPO. This is a capital intensive business and probably won’t show meaningful financials for years, if ever.
So keep an eye out for the IPO if you’re interested, consider one of those other investments if you think the satellite business in general is compelling (or you like Qualcomm or Softbank or Intelsat for other reasons), but I don’t see any reason to buy any of those stocks primarily because of OneWeb. They won’t have their first rocket in the air for months, and even with their ambitious launch schedule (a new launch of satellites every three weeks for two years to fill out their “constellations”), they won’t have any customers to speak of until at least 2020, and they probably won’t be making money and generating investor enthusiasm for a long time after that (if ever)… unless regular investors start thinking of Wyler as a visionary with a world-dominating plan and just want to throw money at him, like they do with Elon Musk sometimes. If you can’t tell, I’m skeptical — despite the coolness (and possible future value) of the OneWeb business.
Which doesn’t mean that OneWeb won’t work out as a great advancement for mankind, or even a great investment some day, but, if you’re researching this idea, I’d keep your expectations a little closer to the horizon. If you’ve looked into private satellite businesses, or OneWeb, or have any similar favorite ideas to share, please shout ’em out with a comment below (and we’ve kept all the original comments from the earlier versions of this article attached, so you can see what folks were thinking about these ideas over the past six months or so).
P.S. In case you’re wondering whether those previous iterations of the ad were prescient about the importance of getting in by whatever the made-up date was with your investment in Intelsat, Softbank, Echostar or whatever other partner Blanco might have liked, that’s still open for debate — but we can look at the actual stocks that might have been Blanco’s picks, particularly Softbank, which he is much more clearly teasing in the most recent ads. Here’s an updated sample of the charts of those likely candidates… that blue line is Intelsat, which has has a huge surge recently. For most of the past year Softbank has underperformed, but it recently caught up to and passed the S&P 500, and Qualcomm has done pretty well recently, too, though Echostar has been notably ugly.
I Total Return Price data by YCharts
Intelsat has done incredibly well in its recent stock price recovery, but remains the poster child for what a scary balance sheet can look like in the satellite business, with $14 billion in debt sitting on top of a market cap that once dipped down to $160 million (though it has recovered to about $3 billion in the past few months), so that one will probably always have a volatile stock price and, for more conservative investors, will probably forever feel like it’s a bad launch away from bankruptcy.
Personally, I’d still stick with Qualcomm out of this group — they own a little piece of OneWeb, and it almost certainly won’t mean anything to their results in the next ten years, but they also have a strong toehold in 5G wireless and a great balance sheet that’s fueling big buybacks, a nice dividend, and, thanks to the Apple royalty dispute and the tariff wars with China, a fair dose of risk that has probably kept the stock from rising to what would otherwise be a “fair” level. Sadly, those risks could genuinely have a huge impact, which is why my Qualcomm position is small… but that’s still my favorite if you make me choose among that bunch.
Disclosure: I own shares of Amazon and Alphabet and Qualcomm, briefly alluded to above. I do not own any of the other stocks mentioned, and will not trade in any covered stock for at least three days per Stock Gumshoe’s trading rules.
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