On SATS, I've done a similar SoTP exercise, and I'm coming in lower. There are a few areas where we differ.
On SPCX stake, I think SATS owns 262m shrs, right? So multiplied by SPCX shr px of 161/shr, that is $42bn in pre-tax value. You have nearly $47bn in pre-tax so decent sized delta there. Your method is SPCX valuation x 2.2% SATS ownership. However, I'm guessing their diluted stake is lower than 2.2% after reflecting all the IPO/pref conversions/etc. I think it's simplest to calc their stake in terms # of shares which is known multipled by the SPCX shr price.
On the sale of spectrum to SPCX, I'm using $8.5bn versus your $10.5bn. I think the delta is SPCX is covering a future interest payment for SATS. However, that's just future burn avoided for SATS. It's not really an asset. That brings up another point of how to best reflect ongoing burn at SATS from corporate overhead + interest. I think that will end up justifying a discount to NAV over time, but that's for another day once we see the dust settle.
Lastly, on your cash balance. I think that might include some cash from DISH and Hughes. I think those are zeroes over the long term as debt likely exceeds fair value, so I assume that's not cash that is recoverable/usable at the SATS level. I think that's around $1.2bn.
So those 3 drivers explain $8bn delta, which is around $20-$25 per share in value.
Will review for any other differences and happy to compare notes if of interest.
Thanks for sharing Brendan – agree with you on 1, was still leaning on my pre-IPO methodology. What they decide to do with the imminent excess cash proceeds from AT&T (would expect at minimum some interest receipt offset) + legacy businesses (DirectTV merger + monetisation of 7.5M Boost subs) we should know soon enough within the next 3-9 months (the DISH/DBS restructuring + deleveraging was telling). Personally believe the call option will offset burn to the upside but your adjustments are fair within the bookends. The other two swing factors here are (i) the $4.2B tax liability on spectrum sales (potentially avoidable through section 1033) + the $2.4B FCC escrow for tower lease termination costs (drawable amounts still subject to dispute). Net net the NAV distribution range (away from underlying $SPCX performance) is probably somewhere in the $150-$210 range and the MoS vs the low-end with higher NAV variance vs. typical spread trades is what makes this interesting.
Not today, will reassess after all few more trading days. Recycled most of my earlier sells back in Friday, ~10% position at around 88 avg cost right now
On SATS, I've done a similar SoTP exercise, and I'm coming in lower. There are a few areas where we differ.
On SPCX stake, I think SATS owns 262m shrs, right? So multiplied by SPCX shr px of 161/shr, that is $42bn in pre-tax value. You have nearly $47bn in pre-tax so decent sized delta there. Your method is SPCX valuation x 2.2% SATS ownership. However, I'm guessing their diluted stake is lower than 2.2% after reflecting all the IPO/pref conversions/etc. I think it's simplest to calc their stake in terms # of shares which is known multipled by the SPCX shr price.
On the sale of spectrum to SPCX, I'm using $8.5bn versus your $10.5bn. I think the delta is SPCX is covering a future interest payment for SATS. However, that's just future burn avoided for SATS. It's not really an asset. That brings up another point of how to best reflect ongoing burn at SATS from corporate overhead + interest. I think that will end up justifying a discount to NAV over time, but that's for another day once we see the dust settle.
Lastly, on your cash balance. I think that might include some cash from DISH and Hughes. I think those are zeroes over the long term as debt likely exceeds fair value, so I assume that's not cash that is recoverable/usable at the SATS level. I think that's around $1.2bn.
So those 3 drivers explain $8bn delta, which is around $20-$25 per share in value.
Will review for any other differences and happy to compare notes if of interest.
Thanks for sharing Brendan – agree with you on 1, was still leaning on my pre-IPO methodology. What they decide to do with the imminent excess cash proceeds from AT&T (would expect at minimum some interest receipt offset) + legacy businesses (DirectTV merger + monetisation of 7.5M Boost subs) we should know soon enough within the next 3-9 months (the DISH/DBS restructuring + deleveraging was telling). Personally believe the call option will offset burn to the upside but your adjustments are fair within the bookends. The other two swing factors here are (i) the $4.2B tax liability on spectrum sales (potentially avoidable through section 1033) + the $2.4B FCC escrow for tower lease termination costs (drawable amounts still subject to dispute). Net net the NAV distribution range (away from underlying $SPCX performance) is probably somewhere in the $150-$210 range and the MoS vs the low-end with higher NAV variance vs. typical spread trades is what makes this interesting.
Not today, will reassess after all few more trading days. Recycled most of my earlier sells back in Friday, ~10% position at around 88 avg cost right now
Buying the dip again today? What % position are you at currently following the trims and rebuys ?