[Flash] EchoStar: FCC approves SpaceX deal, all systems go

How we are approaching timing and target levels from here

Ramping up

The FCC has finally given the green light for SpaceX’s purchase of EchoStar’s spectrum (all 65 MHz). This is welcome news as we did not necessarily anticipate that this would happen ahead of the IPO.

In addition, the FCC imposed a $2.4B escrow on EchoStar for potential Tower lease termination claims. $2.4B was in line with our base case and now becomes the max. More importantly this removes yet another overhang.

All these catalysts are now linking up on the same time frame, as the SpaceX news flow also ramps up (we already saw the Claude announcement – expect more).

Maximum attention, all at once – which is what we want.

And this is happening with the short interest looking like this:

Strategy and target levels

We have updated the excel for the revised lease termination costs and included a small module where you can play around with target levels.

On the assumptions below, we think >$175/share is a reasonable target and a level at which it makes sense to start taking money off the table. This would imply a $2T SpaceX valuation BUT note that we are assuming both (i) CGT on SpaceX shares and (ii) an incremental HoldCo discount. The NAV pre-tax is closer to $212 so at $176 we are assuming a 17% discount to that number.

For illustrative purposes, the current share price of ~$134 implies a $1.5T valuation, full CGT and an incremental HoldCo discount of 15%.

Given the news developments, we are leaning towards being more aggressive with sales ahead of the IPO.

While we are cautiously optimistic we will get the target outcome, we will likely look to trim some exposure within that timeframe no matter what. Two main reasons:

• If we do not re-rate now, why would we do so post-IPO – with no real incremental catalyst?

• We are concerned about the level of ownership in SpaceX stock pre-IPO and the potential selling pressure post-IPO

Ultimately we remain fluid depending on how things develop, but we encourage you to have a plan. Should be an exciting few weeks ahead.