Indeed “MarcusM” – fingers crossed! -
SAS are mixing it with global telco big hitters here. This following excerpt from an interview with Meir that I received last night from my regular "Global Telcoms Business” newsletter. The interview is titled – “Meir Moalem of Sky and Space Global on raising $200m to build network of nano-satellites”.
“Let’s get back to the immediate plans. SAS needs to raise the next tranche of money, more than $50 million for GomSpace to build the constellation of 200, but a total of $200 million “including building, launching, operations, R&D and additional ventures”, he (Meir) says.
Full article (Parts of this interview have been gleaned for other sites)
It begs the question, just how do you fund this project?
This seems to be a question on everyone minds at the moment.
I’m going to put forward three possible options, though the third one is a little ‘out there’!
I am suggesting an initial CR to fund the first 50 x nano-satellites (nsats) with a make and deploy value of $50mill. This would give a about a $12mill extra buffer, given the est cost to make and deploy is around $750,000 per nansat
.
I’ll even go so far as to suggest that regardless of the option choice, I think it is possible that the remaining 150 x nsats, might well be funded from income that they generate, coupled (if need be) with a combination of one or more of the other options. It’s a matter of timing!
If we are ultimately shooting for a total global constellation of 1000+ nsats, I am confident that a greater portion of these might well be self-funding, with no or limited need for extra ‘external’ funding. That is up to those who best massage & juggle figures better than I!
Option 1 – Credit Raise (CR)
Most would be expecting a standard ‘vanilla’ CR where the company offers and increased number of shares at a discounted or ‘near to’ current share price. Given the relatively low current SP, a $50m raise would dilute current shareholdings to the tune of an additional 250mill shares if they managed to fill the CR at 20c /share.
In the current climate, that might prove to be a problem. The solution would be to offer more shares at a lower price and maybe also throw in an “option” sweetener. This might be on the basis of (say) 1 x option for every fully paid share at a strike price of around 60c sometime post 2020.
Not sure if current shareholders / non-sophisticated investors would get a look-in though, given the large amount to be raised is not what is normally required to keep a listed company’s wheels greased!
Standard regulatory costs, CR paperwork and timelines would apply which all adds up to extra cash to stump up! If we are to get cracking on the first 50 x nsats, this options would need to be put into first gear within the next month or so IMO.
Option 2 – JV / Earn-in
This option is a deal done basically as a mutual back scratching exercise. Both parties come to the table with each offering something the other needs. Given that intrinsic and dollar values of each are agreed upon, this option need not involve any increase in share numbers, which would be an absolute bonus for existing shareholders.
In this instance SAS requires two main ingredients – nsat production and nsat deployment. Likely contenders here are GomSpace for the nsat production and Virgin for the deployment. Both of these represent real costs to SAS if neither are involved in some form of JV / Earn-in option.
Outside of these two providers, there may well be a global behemoth telco keen to fund SAS with a slice of the impending action in return for a share of profits. Such a contender could well be Huawei that has telcom products and solutions deployed in over 170 countries and currently serving more than one third of the world’s population.
Huawei’s vision is “to enrich life through communication”, similar to the vision of SAS in “connecting anyone, anywhere, anytime.”
I suspect a Huawei type deal is more likely to be a later play for SAS than this initial bid to get the first lot of nsats up there and generating income.
SAS is able to offer access to their nsats and / or a % of profits or earnings once the nsats start generating income. Somewhere within these respective needs, I’m sure a mutually beneficial deal can be struck.
I don’t think GomSpace is a real contender unless they wanted a slice of the ongoing SAS profits AND were sufficiently cashed up to fund the deployment as well as the making the nsats. This close association with SAS might also put them out of favour with other potential nsat customers that GomSpace might attract.
Virgin on the other hand has a real interest in SAS not only as a deployment provider but as a potential customer for on ground mobile and inflight comms. Here a deal might look like Virgin supplying funding and deployment of the nsats in return for (say) 65 – 75% of turnover or % of profits.
As mentioned, this JV / Earn-in option would not dilute the current shareholding structure as all financing would be done ‘through the books’. Of course taking a % of the profits will impact on the share price, but only marginally IMO. The ultimate high profits that this company will generate over time will more than compensate for the costs of producing and deploying the nsat constellation. Not to mention the kudos of having Virgin as both supplier and customer.
Option 3 – ICO (Initial Coin Offering)
Now this option is a bit ‘out there’ but I reckon one that is worth exploring, if not for this particular exercise of raising money but for later as a means of adding value to the SAS service to customers and their clients.
So what’s the diff’ between IPO and an ICO
An IPO (Initial Public Offering) is regulated, almost to extreme with mountains of paperwork generated and heaps of boxes to tick, all to ensure everyone’s ass is covered. All is done to ensure it gets off to the best as possible start, protects the shareholders (but no guarantee) in the event of the business turning pear-shaped. Your IPO investment is converted to tradable shares, giving you part ownership of the company (equity) and the right to vote, …. not that those rights carry any weight unless you are a major investor. At the end of the day, you have little to no impact on the direction of the company or value of your investment in the company. You simply go through your due diligence then throw your money on the table with the hope that those you bet on (management), will provide you with a return i.e. dividend and /or (as I much prefer) a substantial rise in the share price with enough liquidity to be able to exit as and when I want.
An ICO is (currently) not regulated, it is a means of generating cash in turn for crypto currency to build a decentralized business, offering coins or tokens at a pre-determined price in return for the ‘hope’ that the coin will gain some confidence where people will trade goods &/or services of value, be it ‘fiat’ based value. NO SHARES are provided to investors in an ICO. In effect, you get nothing but the opportunity to trade your coin or sit on it as an investment over time. You get no shares, no % ownership in the company with no regulatory safeguards in the event that you get scammed, hacked or duped in some way. Yes indeed, this is the new frontier the ‘wild west’ of financing. Sounds pretty scary and to the uninitiated, it can be. However, once you get through all the negatives, the positives are many and well worth pursuing IMO. I’ll come to them, later.
A particular ICO format that I like is one currently used by Utrust in their extended ICO format. Their ICO has 7 x multiple raisings of tokens at increased prices per token for each tranche. A carefully created ‘White Paper’ would clearly define the SAS coin offering objectives. The “White Paper” is the ICO version of an IPO Prospectus.
Most tokens raised in ICO actually have no relevance or purpose in the real world other than straight trading on various Crypto exchanges. Some manage over time to be recognized as tokens of associated ‘fiat’ value and are traded between holders of the same token or exchanged for an agreed equivalent value of another token. SAS on the other hand, actually would have a business model to back it up.
One company that might assist SAS in the development & inclusion of blockchain technology is Dutch / German company Tymlez.
“The Tymlez Enterprise Blockchain Architecture is optimized to establish trust between parties. You can develop or operate blockchain related applications such as distributed applications or traditional applications.
The state-of-the-art architecture has build-in connectivity to your enterprise legacy systems, so that you can leverage your investments. Our solution can be contained within your existing IT enterprise stack or be attached as a side car, inside or outside of the current boundaries of your entire IT landscape.”
Tymlez works closely with Leondrino Exchange who could develop the SAS token and help implement the ICO.
If SAS raised capital in return for tokens through an ICO, it could do so with three main benefits –
Give credence for investors to openly trade the tokens on any supporting crypto exchange
tokens could be used as a form of trad-able currency for end users to pay for connectivity – mobile, M2M, IoT, payments etc.
Enable SAS to ‘donate’ tokens to nsat connected subscribers (maybe included in the SocialEco app), enabling them to use the tokens to engage in decentralized commerce in their immediate region. The ability for people to trade is as important as it is for them to be able to communicate, IMO.
In Summary…..
I don’t believe SAS will entertain an ICO, certainly not at this stage. Perhaps it will have a shot at it further down the track when / if it sees value adding to customers and their clients, which by extension would also benefit us shareholders. I would certainly be into an ICO if it were on offer!
I reckon the JV / Earn-in option is the one with the best outcome for all concerned. For above reasoning, I reckon the Virgin play is the most likely as the benefits for both parties concerned are obvious. It’s just a matter of doing the deal!
I have not included capital raising through Venture (Vulture) Capitalists or through another popular method … Crowdfunding, as both would have a dilutionary effect on the share base.
I guess we will know the final funding solution sooner than later.
