Hi Folks,

Wow that was a busy Sunday. First, Richard Branson’s space flight 🚀 (more on that later, but glad all went well!), next the Wimbledon (I think we knew Djokovic was going to win…) and then the Euro Cup (Team England over here 😢)…It’s like too much stimulus for one day. Like couldn’t they spread it throughout the week so that us common folks could experience a more sustained state of excitement…it would keep people sane and happier.  They should discuss such things at the G7 summits! And I mean, I must really like y’all that instead of sitting at a bar watching the game, here I sit writing…

I have another story to share and I promise, it’s not that exciting. So it’s good because it will help tame the enthusiasm a bit! There is an acting coach here in town, Aaron, who is quite well known for his coaching and only takes in 6 students at a time. I have been wanting to study under him for almost a year, so I was quite excited a few weeks ago when I found out that I had gotten in. It’s a scene study and audition class which means that each student is assigned a scene from a play, and then has to enact it in front of the camera (and the other 5 students), just like you would audition in front of a casting director. The scenes are about 5-8 pages long and generally, one page equals one minute of on-air time, so it’s plenty to prepare. And not only you have to read the entire play but you have to really dissect the story, the character, what era it took place in, what was the political/social/musical culture like. Etc. Etc. Now before I start sounding like some acting guru myself, the point is that there is a lot of background work that goes into why a certain character presents a certain way, and setting that intention is key because the camera does not lie!

Ok, now that we have covered the basics, I can tell you that I got assigned a monologue from this play Mauritius, which is about two half-sisters, Jackie and Mary, who inherit a stamp collection that might be worth a fortune. Perhaps some of you may have seen it on Broadway?! Let me know! Anyways, I am playing Jackie. And in this monologue, she is this super nervous and scared girl who goes to this stamp dealer to show him the stamps and possibly get a quote, but she is so anxious that she can’t stop rambling. It’s almost pathetically comical. To give you some context, here is some of the monologue –

“I know a lot of people collect stamps, I never did, but I know that this is a popular hobby with some people. Not just nerds, either, normal – oh, sorry, sorry….It’s mine to sell though, I mean, I do own it. It’s been in our family for a long time, there’s some in there, eighteen something. Which, I have no idea if they’re real, I guess they could be fake. With my luck they probably are, but I am trying not to…I am trying, actually, to be positive, although I don’t judge myself for being negative more or less most of the time…But no I am not defending negativity. And, also I don’t think the stamps are fake either…”

And blah blah blah for another 4 minutes. You get the idea…a person is nervous, and starts rambling and then says the wrong thing, and then tries to overcompensate for saying the wrong thing and can’t shut up. It’s a loop. I think we’ve all been there at some point. And I thought it was a perfect first scene for me, given I was naturally very nervous as this is my first class with Aaron, and the thought of delivering a monologue in front of 5 dudes (no girls in this cohort!) was also positively contributing to the anxiety. And so, I thought I could bring all that into the scene.

Except when I delivered the monologue, Aaron’s first feedback to me was “Nikita, you’re too grounded. It’s like you’re not nervous at all!”, and I’m like, is he kidding me…can he literally not see my shaky hands??!! Apparently, not. Apparently, I’m a really good actor. Haha! It’s like the value investors who can’t see value in meme stocks! (sorry have to somehow tie it back to the stock market…I have a tough job here ok!). Ok on a serious note, we both knew that I was nervous, but one person felt it way more than the other. There was a real disparity of perception.

Anyways after 2 more takes, Aaron managed to crank up my nerv-o-meter and got me to bring out that inner anxiety… to the point where my heart was racing and I started forgetting my lines (which is a good thing because that means you’re in the character) and actually started shaking and rambling. And that pathetic comedy came through because all the boys were laughing by the end. Wow, what a hot look. NOT! 

But there you have it – that’s the story I wanted to share. As I said above, it doesn’t really have any correlation with investing but yet I think there is. There is a quote by Gustave Flaubert that comes to mind,

“There is no truth. There is only perception”

And the stock market is also a perception game. And because there is a difference in perception, there are buyers and sellers. When it comes to SPACs, there is still a perception out there that those companies aren’t as ‘good’ for lack of a better word, as the companies going public via a traditional IPO. There is no right or wrong, it’s a perception! But the good thing is that, perceptions are also fluid. And as events happen, the perception-o-meter changes to reflect them!

For example, the Space sector that seems to be benefitting from a positive perception right now. It has gone through its own ebbs and flows. Apparently, when Chamath was first searching for a target for $IPOA, the clock was ticking and he was scrambling to find a deal within the 2 year mark (they later had to file for an extension). On the other hand, Richard Branson was looking to raise money for his money-losing venture, called Virgin Galactic. He had secured $2B in funding from the Saudis, but then the Khashoggi murder happened and Branson was wisely advised to not take that funding or else it would be much harder for him to raise more money later. And then, in a fateful twist, Chamath, a desperate SPAC sponsor met Branson, a desperate target and $SPCE was born. But back then, the perception around ‘space tourism’ was quite low and after the deal closed, the stock went down to $7!

But two years later, the perception-o-meter seems to have moved quite positively in favour of the space sector. $SPCE is still burning money, and will continue to do so for the forseeable (read long term) future, but the sentiment is positive now. And as we just learned that it’s not the truth that matters, but the perception around it, this has helped renewed the bid for the sector.

Unsurprisingly, $SPCE was the most mentioned ticker on the WallStreetBets today. (And on Friday too). Yes, Branson flying to space today is a big, big deal and out of all the publicly traded companies, the one we can’t stop rambling about is a cash burning, esoteric space tourism company that already trades at 221x 2022 Revenue…!

That’s because the perception is that we are going to the moon. As I have been mentioning for the last couple of weeks, Bezos originally gave a boost to the Space sector names by announcing his Blue Origin flight. And today, with Branson successfully taking the Virgin Galactic flight, it is going to further fuel the enthusiasm for the sector. It’s already starting to get the sell side attention. In a note to clients, Morgan Stanley wrote, “we are working hard to connect the dots…Space is worth devoting significant research to…and that it is hard and investors must approach with a ‘venture mentality’, aka high risk of failure and need for long term thinking”. More like we will be coming out of with Price Targets for these companies but not on a revenue multiple (because they barely have any!) but on a multiple of “long term thinking”.

And while we may perhaps not be able to get to Space ourselves any time soon, we can get aboard the “to the moon” flight. Here are some of the SPACs in the space (and related) sector that are worth watching in the near term, especially as Bezos hops on his space flight in 9 days.

I also liked the Space SPAC trend update by Michael Sheetz, who is the Space reporter at CNBC. While on a YTD basis, only $SPCE, $ASTR and $VACQ have returned positively, but what’s worth noting is the number of competitors that are emerging.

Here are also the returns of the pure play space stocks, which look much better.

So, as the sector perception turns positive, and more daring billionaires emerge to hop on these flights (and get public markets to fund their trips!), more competitors emerge, more space companies go public, research desks start covering more names, there will be a lot of crashes (pun intended) but there will also be innovation and real progress. The perception leads to momentum, which in turn leads to innovation. Maybe Chamath was right after all about his $SPCE thesis…10x in 10 years 👀 🚀

And thinking about that, I will hop on my bike 🚴. Have a great week ahead!

-Nikita