Recommendation:           Short Common Stock

Company:                          DigitalGlobe Inc.

Ticker:                                DGI

Price:                                  $32.18

Mkt Cap:                            $2.4bn

Enterprise Value:              $3.4bn

Net debt/EBITDA:               4.0x 2013E

Daily volume:                    674k shares ($21.8mm)

Short interest:                    5.4%

Price target:                        $11.65

% Gain to target:                64%

• Business model ultimately flawed; we believe at full run rate, earns little to no economic earnings or EPS. Valuation extreme given heightened expectations and flawed model.  
• Consensus estimates beyond 2013 are best described as highly unrealistic, even bulls we’ve spoken to don’t have upside to consensus numbers.   Based on reasonable but arguably still optimistic assumptions, we see meaningful misses to consensus revenue and EBITDA estimates over the next two years.
  • We believe that revenues will come in at $332mm, $683mm and $799mm in 2H13E, 2014E and 2015E versus consensus at $355mm, $724mm and $871mm, respectively.
  • EPS should come in at ($0.23), ($0.11) and $0.10 versus consensus at ($0.03), $0.46 and $1.13 for 2H13E, 2014E and 2015E, respectively.

• Promotional management team has set a high-bar on expectations around blue-sky growth.

• The merger between the  #1 and #2 player in the satellite imagery market  niche created the belief of limited competition, oligopolistic pricing, and synergies as major drivers of growth in near-term off of a depressed EBITDA margin base.  As a result DGI has become a recent “darling” stock apparently combining an event stock with blue-sky growth story.

• Problem is growth is not there.  When you look at pro forma results to date, new DGI has barely grown and trends are deteriorating.   Need to have substantial acceleration to hit 2013 guidance which is likely to be cut. 

• EBITDA margin targets even harder to achieve; synergies alone don’t get DGI to guidance targets as it requires incremental contribution from aggressive growth targets.  Despite 70% of opex synergies already achieved, margins barely up.

• Heavy event hedge fund ownership at >25% of outstanding shares as of recent filing information.

Business Description

DigitalGlobe Inc. (“DGI”) operates a constellation of five[1] specialized satellites generating high-resolution earth imagery, primarily used for defense, intelligence and homeland security applications as well as various other commercial uses. The US Government represents 55% of revenue, foreign governments 30% and the remaining 15% from imagery-related products and services sold into commercial applications, split roughly 50%/50% between Location Based Services (LBS) and “other verticals.”  LBS customers include Google, Apple, Microsoft, Nokia, and Garmin with “other verticals” revenue primary from niche applications within the oil & gas, agriculture, real estate development and environmental industries.  Note that DGI reports revenue in two segments, US Government and Diversified Commercial, with the latter derived from both foreign governments and commercial customers. 

• NGA Contract (“SLA”) - DGI generates revenue from the US Government through a 10-year (cancelable annually) Service Level Agreement managed by the U.S. National Geospatial-Intelligence Agency (NGA), which is part of the Department of Defense.   This contract, dubbed EnhancedView, began in September 2010 and is made up primarily of the SLA under which DGI is paid $250m/year for first rights to a fixed amount of capacity of the next generation satellites in orbit.  GeoEye (“GEOY”), DGI’s nearly identical domestic competitor, concurrently received a similar but somewhat smaller contract from the NGA.  In essence, the NGA manages purchasing of satellite imagery for various US Government agencies, with the vast majority used for mapping, monitoring and threat assessment by various defense & intelligence agencies.  Note that DGI will launch a sixth satellite in September 2014 that triggers a $50mm annual payment step-up under EnhancedView.
• GeoEye Acquisition – In mid-2011 US Government budget pressures arose and in mid-2012 the NGA announced it would not renew GEOY’s SLA.  As a direct result, DGI acquired GEOY in July 2012 for cash, stock and assumed debt valued at $900 million.[2]  The US Government effectively forced consolidation as a means to cut costs, with ~$200m of GEOY revenue eliminated from the budget.  The transaction closed on Feb 1, 2013.  DGI guided to $100m of opex synergies over six quarters with a target of returning to 50% Adjusted EBITDA margins post-integration with the benefit of synergies from an initial level of 28% EBITDA margins pro forma for the combination.  As an additional benefit of the transaction, DGI acquired the nearly complete GeoEye-2 satellite; upon its completion in 2H13 it will remain in storage as a “ground spare,” potentially creating a growth capex holiday from 2015-2017 if not otherwise monetized or utilized as a replacement in the case of an existing satellite’s failure.  

Investment Thesis 

• Promotional management team has set a high-bar on expectations around blue-sky growth.
• Management has been prone to exaggerated claims and opportunistic changes to reporting metrics. 
• Consensus revenue growth expectations, and by extension DGI’s valuation, in our view is nearly entirely dependent on the perception of a “blue sky” opportunity for commercial revenue growth perpetuated by management. 
• This impression is largely based on the popularity of Google Maps, and the assumption that DGI’s imagery must therefore have an opportunity to play an integral role in the Lo- component of the hot “So-Lo-Mo” (Social, Local, and Mobile) investment theme.
• This narrative has gained prominence quite conveniently at the same time that recent US budget pressures have necessitated management diverting attention from the risks to their >50% customer.

• We believe the blue-sky nature of the commercial opportunity to be largely unfounded.

  • LBS (“Location Based Services”), DGI’s euphemistic term for selling commoditized digital images from their image library to true LBS customers, is the only substantive application for satellite imagery, outside of government surveillance.  That said, even for LBS the company overstates the value of DGI’s participation in the value chain.  The true “value add” of LBS services providers (Google, Apple, Nokia, Garmin, etc.) is in the software that power these services to use real time location data for which the visual image is not that relevant; satellite and aerial imagery provide only the “wall paper”, so to speak. DGI management has used the popularity of LBS as an end user application to exaggerate their involvement in the economic rents created by these services.  Case in point was CEO Jeff Tarr’s commentary on the most recent earnings conference call in August: “And then Location Based Services, the hyper-growth that we're seeing for geospatial services.  Every time you open up your iPad and you see every time you open up an application and it says, will you share your location, even for applications you can't imagine why they would want to know. Well, GPS is part of that. That tells you where you are.  But we're the rest of it.  We tell you where everything else is and we're integral to so many of those applications.”  Management has no problem using this sort of sleight of hand to create the impression of a large blue-sky opportunity, though our research suggests no such opportunity exists.  After nearly a decade of existence as an end-market, LBS represents only 7.5% of total DGI revenue today, or ~$45m of annual revenue, with Google believed to represent between $10m-$15m per year. 
  • This revenue level has been achieved after all the major LBS competitors have established their global base map, with the most recent entry being Apple.  Though difficult to confirm, it is possible that DGI benefited from a bolus of spending as these customers built their base map with “maintenance” spending being lower than the initial construction.  Additionally, a reasonable case could be made that more customers are likely to exit this space (e.g., Nokia) than are likely to enter going forward.
  • Satellite imagery is only one input into these products and, when used, is most often utilized for the lower-value areas.  Aerial imagery is often used for urban/high-use areas given its resolution advantages, increasingly important as the use of 3D maps have gained prevalence.  Satellite imagery is typically used to fill in suburban, rural and sparsely or uninhabited areas, where recent imagery is often of less value and thus pricing is very low.  In fact, Google maps has just started to make the transition depending on geography where the close-up visual images are taken by aerial imagery instead of satellite, given aerial’s higher resolution, suggesting that this “LBS” opportunity may be very near fully realized by DGI today.[3]

  • Outside of LBS, commercial use cases are highly varied and generally niche in nature, with examples including agriculture and forestry management, land development, environmental monitoring, pipeline corridor monitoring, oil & gas exploration, and insurance & financial services.  

    • Our research suggests that these opportunities are largely one-off and thus difficult to standardize/commercialize.  Furthermore, most of these potential applications require driving awareness and come with high customer acquisition costs.  DGI has relied on small resellers to drive growth in this sector, and as a result, this revenue stream is lower margin and difficult to scale.
• The merger between the  #1 and #2 player in the satellite imagery market  niche created the belief of limited competition, oligopolistic pricing, and synergies as major drivers of growth in near-term off of a depressed EBITDA margin base.  As a result DGI has become a recent “darling” stock apparently combining an event stock with blue-sky growth story.
  • Underestimated competitive/pricing risks post-merger:  the general view that this combination will result in a near-monopolistic market position for the combined company is incorrect, as it ignores existing and emerging competitors and other viable substitutes.
  • Astrium GEO-Information– A subsidiary of EADS, Astrium has historically operated lower-resolution (>1m) imagery satellites, but in late 2011 they launched Pleiades 1A entering the high-resolution market.  This was followed up with the launch of Pleiades 1B in December 2012.   As a result, at the same time DGI was eliminating its direct competitor (GEOY), another emerged.  Additionally, because of constellation benefits (increased frequency of “passes” per day) and average customer contracts generally ranging between one and three years, the competitive risk to DGI is likely building over 2013 and into 2014.
  • The two satellites slated for launch in 2017 and 2018 by UAE will be built and operated by Astrium. They will also likely be used for a limited amount of imagery over the Middle East by the UAE while the capacity covering the rest of the world will likely be available to be marketed by Astrium as the manager of these satellites further exacerbating the overcapacity situation in 2017-18.
  • Skybox Imaging – Backed by high-quality venture capital (Bessemer, Draper), Skybox plans to operate a constellation of at least 24 small, significantly lower-cost ($20m-$30m/satellite) but also lower-life span (3-4 years) “microsatellites” at 0.7m-1m resolution.  A constellation of 24 of these mini-satellites in orbit would allow for a meaningfully higher daily refresh rate for a particular location vs. DGI’s current ~2x.  This superior value proposition coupled with microsatellites’ capital cost advantage is likely to drive disruptive pricing and share gain.  Skybox is currently targeting a September launch for SkySat-1 satellite with a second satellite launch in 4Q13.  Note Skybox’s ability to fully fund its vision remains uncertain.
  • Aerial – Imagery taken by airplane is a popular substitute with meaningful resolution advantages.  However, aerial imagery is higher priced due its greater collection costs and also has refresh cycle disadvantages vs. satellite imagery. Drones are mentioned as potential catalyst for lower aerial imagery costs, though timing is uncertain.
  • National Reconnaissance Office (NRO) – The NRO designs, builds, and operates the US Government’s spy satellites and is a direct competitor for DGI’s US Government business.  The number, capability and build plans of the NRO’s satellite constellation are classified.  Expert calls suggest that these satellites are more capable but provide the minority of overall US Government imagery demand.   That said, given the current budget pressure, the NRO is viewed as a powerful internal constituent with the ability (if not the track record, e.g., with GEOY) to win a larger proportion of spend in a contracting budget environment.

  • Key Customers:  Google & ESRI

    • Google – An indirect substitute as it makes its imagery available for free through Google Maps APIs.  DGI is a primary supplier, but Google also uses Astrium and aerial imagery.
    • ESRI – A private geo-information systems software company with over $1bn in annual revenue. ESRI’s core business is built around the ArcGIS software suite which is used for creating and using interactive maps and other digital geographic information.  ArcGIS is analogous to AutoCAD in its dominance of its niche; per one expert, 100% of S&P 500 and over 90% of the Russell 2000 licenses ArcGIS software.  While ESRI is a customer of DGI for raw imagery, they are increasingly competitors as well.  Historically, ESRI just sold its software but did not provide the raw imagery input; however, ~2 years ago ESRI built an imagery library (updated quarterly) that is now free through ArcGIS, largely in response to Google Maps open APIs.  In short, ESRI provides all the ingredients for corporations to build mapping related products and services in-house.  ESRI is also developing cloud-based GIS capabilities that will compete more directly with DGI on services going forward. 
    • Customer perception of the value of digital satellite imagery has been degraded by Google and ESRI largely giving it away for free to consumer and corporate users. 
  • Heavy event hedge fund ownership that (from our discussions) is not focused on understanding the underlying trends and are involved in a stock that is priced for perfection and where the valuation demands that most of this upside is realized. 
• Problem is growth is not there.  When you look at pro forma results to date, new DGI has barely grown and trends are deteriorating.   Need to have substantial acceleration to hit 2013 guidance which is likely to be cut. 
  • Pro forma revenue growth achieved post-merger has been tepid.  
  • 1H13 revenue for new DGI grew 4% yoy, adjusting historical GEOY revenues for the loss of its NGA SLA contract.  However, more than 100% of this growth was due to GAAP accounting treatment (straight line cash payments versus ratable increases over contract term from a GAAP accounting standpoint) of the remaining DGI SLA such that underlying true organic growth was down 3% yoy in 1H13.  
  • This compares to an estimated 9% and 12% yoy growth in 2011 and 2012, respectively, again adjusting out GEOY’s historicals for the loss of its SLA.

  • Management appears to have set up either an improbable back-half performance or, more likely, a cut in full year guidance.

  • DGI guided to full year 2013 revenue of $635m-$660m on their 4Q call on February 26^th, excluding GeoEye for the 4 weeks in the full year numbers prior to the closure of the merger.  On the 1Q call in May, management held the range, but noted “a greater likelihood of the lower-end of the range.”  2Q results demonstrated additional poor underlying trends: a second quarter of negative yoy pro forma growth in acquired GEOY revenue and meaningful deceleration in legacy DGI revenue (ex-SLA) resulting in negative overall organic growth.   Despite this performance, management reiterated full year revenue guidance with 2Q results. 
  • DGI’s backlog also posted its first sequential decline in 2Q since they began disclosing the metric.
  • As a side note, management’s promotional nature was highlighted in this conference call as they claimed “strong organic growth” in both 1Q and 2Q despite true organic growth being negative excluding the step-up in SLA revenue that was non-cash and purely an accounting mirage.  Additionally, the call slides and their commentary on the call all quoted growth rates treating the acquired GEOY revenues as organic growth. 
  • Management also changed the segment accounting making it more difficult to distinguish what true commercial revenue growth looks like on its own going forwards.

  • To hit the low-end of guidance, organic growth (ex-SLA) would have to accelerate from (3%) in the first half to 14% yoy in the back-half.  More specifically, hitting this revenue target would require Non-SLA US Government revenue to double its yoy growth rate from 1H to 2H and Commercial (non-DAP, discussed below) revenue to swing from yoy declines in 1H to more than 35% yoy organic growth in the back half. 

    • The best available proxy for DGI’s addressable commercial market growth trends are the pro forma (DGI+GEOY) Diversified Commercial revenue results.  After experiencing yoy decline in 2009 and a snapback in 2010, they declined from 15% yoy growth in 2011 to 5% in 2012 and now 2% yoy in 1H13.  
    • Competition from Astrium should be increasing in 2H given their meaningful recent capacity addition (Dec 2012 launch of second high-resolution satellite) and from our conversations with Astrium’s Geo-Information segment management suggesting they are targeting meaningful market share gains.
  • The combination of management’s efforts to obfuscate core organic trends and the fact that the most significant incremental competitor sits within a large conglomerate explains, at least in part, how this can be misunderstood. 

  • Finally there continue to be risks to US Government revenue in both the short- and medium-term.

    • Bulls believe that post the NGA’s cancellation of GEOY’s SLA the risk from US Government budget pressure has been eliminated.  This complacency is unfounded given: the budgeting process is opaque, the mix between imagery from national satellites assets is classified and potentially dynamic, general US budget pressure is likely ongoing, the SLA is annually cancelable, and 10%+ of DGI’s total revenue (20%+ of US Government revenue) falls outside the SLA making it exposed to even greater risk of sequester-related cuts.
    • While research suggests that DGIs imagery is certain to remain a key input to US Government defense & intelligence procurement, it was also definitive that the overall amount of imagery supplied to the Government exceeded its capacity for processing and use (hence the cancelation of GEOY’s SLA).   The assumption that equilibrium as been reached or undershot is a dangerous one, highlighted by the fact that the last data point from DGI’s 50%+ customer represented a 33% year-over-year reduction in spend without apparent disruption.
• EBITDA margin targets even harder to achieve; synergies alone don’t get DGI to guidance targets as it requires incremental contribution from aggressive growth targets.  Despite 70% of opex synergies already achieved, margins barely up.
  • 2013 Adjusted EBITDA guidance calls for full-year margins of 36% after posting 24% margins in 1H13, implying 41% in 2H13.   While synergies will roll in through the year, these projections appear highly aggressive.
  • Once you normalize for synergies on the base business underlying margins have deteriorated both sequentially in 2Q13 and yoy in 1H13.   
  • In fact, with nearly 50% of synergies realized in 2Q13 (70% exiting the quarter), EBITDA margins were still only 30% versus DGI’s guidance of 50% margins when full synergies are realized in 2H14.
  • Incremental margins implied given the synergies realized were only 11% in 2Q.
  • The company stated they had to reinvest some of the synergies into further growth initiatives as an explanation for the low incremental margins.
  • To achieve full year EBITDA margin guidance DGI would need to achieve ~75% incremental margins on top of the synergy realization that is being forecasted.  This includes giving them full credit for hitting aggressive revenue targets. 
  • Thus, both near-term (36% 2013 target) and medium-term (50% post-integration) margin targets hinge on achieving growth that, as discussed, appears highly unlikely.
  • Finally, as mentioned above, commercial revenue opportunities come with higher customer acquisition costs, are largely less standardized and difficult to scale, and thus are inherently lower margin.
• Business model ultimately flawed; we believe at full run rate, earns little to no economic earnings or EPS.
  • The satellite imagery industry is structurally flawed and destined to be in a persistent state of overcapacity.
  • Non-economic actors (governments) create supply to serve peak-demand for an extremely small portion of overall satellite capacity:  global geo-political “hotspots”, currently the Middle East and, to a lesser degree, North Asia.  However, given the physics of sun-synchronous orbits, imagery satellites only spend a fraction of their life over these hot spots creating significant overall excess capacity.  
  • These governments then look to defer the high cost of these assets by selling this excess capacity to foreign governments and the commercial markets.    This dynamic appears to only be worsening as highlighted by the recent launches of two high-resolution satellites by European interests and the recent announcement that UAE would fund the construction and launch of two additional satellites in 2017 and 2018. 

  • This situation is made more dangerous by the extremely high fixed cost nature of the business and near zero marginal cost of selling digital imagery plagued by a short half-life of economic value for the bulk of use cases. 

  • A critical dynamic to understand is that premium pricing is only achieved in this industry for fresh/recent imagery (and explains why the primary application for these satellite is government intelligence work).  
  • For many applications, aged imagery is sufficient and thus pricing for archived imagery (>6 months old) has experienced rapid deflation in recent years.

  • Given the fact that these satellites are generally launched on the back of government contracts that provide a baseline of revenue that is not sufficient to earn the cost of capital required on these satellites, they require additional 3^rdparty revenue to justify commercial involvement.

    • To date, that commercial involvement has been limited and insufficient to get an appropriate return, however, the satellite operators and capital markets have been willing to proceed on the basis of future revenue opportunities that will justify commercial involvement.
    • In our base case, we struggle to get to meaningfully greater than breakeven EPS despite forecasting revenue growth to increase by one-third over 3.5 years.   Given industry structure (excess capacity) and potential risks to US government revenue, even this case may turn out to be aggressive.
    • Thus, once steady-state capacity is achieved, GAAP accounting should then properly reflect underlying economics which – at least at current cost of high-resolution satellites – leave zero economic earnings for common shareholders.
      • To provide a single satellite example, DGI currently generates between $167mm and $200mm of revenue per next-generation satellite[4].  Applying 70%-75% gross margins and $200m of total SG&A (implied by post-synergy run-rates targets), or $117m-$150m of gross margin dollars and $67m of annual SG&A burden,  yields $50m-$83m of annual EBITDA per satellite.  Once you account for deprecIation (satellite capital costs range from $500m to $700m and are typically depreciated over 10 years) and interest costs (given history of financing the majority of capital costs with debt) you are left with negative or, best case slightly above break-even single satellite economics. 
• Valuation extreme given heightened expectations and flawed model.
  • DGI bulls value the company on 2015 EBITDA and FCF metrics given that both the SLA step-up from the sixth satellite launch and completion of GEOY integration will not occur until 2H14.   Assuming bullish assumptions materialize and the company trades at 9.0x forward consensus 2015E Adj. EBITDA of $453mm results in a $46.50 price target (implying a 8.0% forward 2015E FCF Yield) in 1.5 years.  Bulls also focus on the FCF Yield given the potential capex holiday from acquiring an additional satellite from GEOY. 
  • However, this valuation methodology has a number of issues:
  • First and foremost, it relies on the bullish growth and margin assumptions that we believe are challenged for the reasons discussed above. If you use what we believe are more realistic assumptions, the valuation changes substantially due to the operational and financial leverage of the business. 2015 Adj. EBITDA falls to $360mm.
  • This scenario results in a company that produces only $0.10 EPS in 2015.
  • Even giving credit for the capex holiday which we believe will start to reverse in 2016 and beyond, the unsustainable FCF per share of the company in 2015 will be $2.56 which will reflect a near peak FCF number.
  • Note that the capex holiday may well be misunderstood by the market.  Based on the disclosed economic life of DGI’s next generation satellites and a range of three to four year advance build time, it is currently unclear to us if the capex holiday is as beneficial as commonly believed.   It may well be neither as long as management has let investors believe (2015-2018) or an absolute holiday (i.e., only maintenance capex) versus just a deferment of capex on one replacement satellite while another is required to be concurrently constructed to maintain capacity. 

  • In addition, the capital intensity of the business makes it more appropriate to look at EBIT or P/E on an ongoing basis.

    • Rolling forward bull/consensus expectations into 2015E – when growth rates should be normalized post one-time step-up in SLA and lapping a full year of post-synergy profitability – and using the current price implies a valuation of TEV/EBIT of 15x and P/E of 29x.  
    • Given the operating and financial leverage of the business, on our assumptions for 2015E, the company trades at 46x TEV/EBIT and a P/E of 313x.
  • Given we believe that the satellite economic model doesn’t earn its cost of capital as discussed above, even book value likely represents an optimistic valuation for DGI.    However, DGI operates in an ecosystem with government actors who are not necessarily economic in their behavior.   Because these players exist, we think tangible book value – or even a small premium to account for lack of launch risks – represents a reasonable valuation target for DGI.  Assuming this methodology, the business would be worth $11.65 per share today and would imply a 2015E P/E of 113x and TEV/2015E EBIT of 22x.
  • Consensus estimates are premised on unrealistic commercial growth expectations, suggesting the potential for significant misses to consensus revenue and EBITDA estimates over the next few years.  Given that the (flawed) EBITDA multiple valuation construct advocated by the bulls is highly dependent on this growth in commercial revenue to justify exit multiple targets, we see the potential for a dramatic re-rating of DGI’s stock as this revenue growth fails to materialize.     

Key Risks

• Pricing upside – Consolidation allowing for greater pricing power in oligopoly business than we expect.  DGI has touted investing in pricing optimization models to be applied to high-demand supply.  Anecdotal channel checks suggest that DGI attempted to raise prices to resellers (15% of DGI revenue pre-merger, GEOY didn’t disclose reseller mix); expert calls suggest that Astrium is initially attempting to be disciplined on pricing, at least through similar reseller channels, using DGI as an umbrella and only pricing modestly behind them.   Mitigants to this risk include: (i) general excess capacity for commercial-focused use (i.e., non-defense related “hot spots”), (ii) expert calls suggest that larger commercial customers (Google, ESRI, etc.) are quite savvy at playing one supplier off another given scarcity of scale contracts in industry; (iii) Astrium has meaningful excess capacity given recent (Dec 2012) launch of second high-resolution satellite and from our conversations with Astrium Geo-Information segment management they are targeting meaningful market share gains, and (iv) the existence of aerial imagery as a superior resolution substitute, thus creating a pricing ceiling on satellite imagery. 
• Unanticipated Government demand – Potentially from greater than expected growth in the DAP business or from a more tail risk dynamic such as a increase in geo-political tension (i.e., war) large enough to drive incremental demand from governments.  Mitigants to this risk include the launch of Astrium’s satellites where foreign governments do not necessarily get second tier preference on available imagery to the US government as is the case with DGI.
• M&A – We believe acquisitions to be the only means by which DGI can achieve consensus revenue estimates.  However, expert calls suggest no sizable, attractive acquisition targets exist in this space.   Even small bolt-on targets are scarce, with the most likely being current resellers, though we believe these businesses to be highly margin dilutive to DGI’s business.  We feel strongly there is no logical acquirer for DGI and thus takeout risk is minimal to non-existent.
• Synergy/margin upside – Research suggests that DGI’s $100m of opex synergy guidance is achievable and realistic.  Modest upside is possible in the medium-term, but we believe this upside should be largely offset by investments required for DGI to achieve commercial revenue growth. 
• GeoEye-2 monetization – The total cost of construction was $700m+ and the potential exists for DGI to structure a sale or creative transaction with a foreign government tenant.   However, outside of such a transaction there exists no natural buyers of this asset making DGI’s negotiating position challenging.  Additionally, if the satellite were somehow monetized it would damage the “capex holiday” leg of the bull case and/or the large commercial TAM bull case as it would imply additional capacity wasn’t needed.