James Altucher is pitching a “backdoor” way to play the potential IPO or Starlink, which is the global satellite internet provider owned by SpaceX… so let’s dig into the clues he drops, and see who he’s talking about.

This is all in an ad for Altucher’s Investment Network ($49, 90-day refund period), which is his “entry level” newsletter… and the first part is mostly just a spiel about how powerful Starlink is, and how it could potentially be the biggest story in telecom as they extend high speed internet to everyone in the world… here’s a little taste:

“… while almost everyone is focused on Tesla…

“Or on Twitter…

“Or even on his most recent xAI startup…

“Behind the scenes, I believe Elon may be quietly planning an IPO for an even bigger company in the months ahead…

“A ‘Super-IPO’ that could create well over $100 billion on the first day it goes public.”

And then the hype boils over…

“Up until today, everyday Americans like you have been entirely LOCKED OUT of profiting from most companies before they go public.

“Unless you were a wealthy and well-connected insider, there was no way to get into the company before the IPO.

“And by the time the company went public on the stock market – and you could invest for the first time ever – the biggest profits were already long gone.

“They were made years earlier by elite venture capitalists.

“In fact, according to Inc., by the time a company goes public, 95% of ALL profits have already been made.

“You’re left with the table scraps… with just 5% of the upside remaining.

“Well, that rigged game ends today…

“In the next few minutes, you’ll see a secret “backdoor” way to profit BEFORE Elon’s company goes public!”

He loads up some more FOMO…

“This Starlink ‘backdoor’ play could be the next big opportunity!

“What you’re seeing today is, without a doubt, one of the biggest opportunities of the decade.

“I say that with 100% certainty.

“The fact is, I believe Elon’s Starlink could be much bigger than any of his previous ventures.

“It could be bigger than PayPal… Tesla… or Twitter.

“It might even be bigger than all of them put together!”

You probably already know about Starlink, which is SpaceX’s Low Earth Orbit satellite communications company, using a network of thousands of tiny satellites to provide internet access across most of the globe. It’s been widely reported because Starlink terminals have been used in Ukraine, after they lost a lot of their telecom network, and because it was a cool product introduction in 2020 that pretty quickly attracted some of the customers the network was designed to serve, folks who live outside of broadband coverage areas, and got some good broadband contracts from several airlines and cruise lines in recent years.

And there’s plenty of hype about Starlink’s potential ability to really disrupt the global broadband market place in dramatic ways and bring everyone online, though many experts have also cautioned that it’s a great rural solution but a terrible solution in more developed areas (the network may never have the capacity to serve thousands of customers in a small geographic area, that congestion from a lot of users on just a few micro-satellites would result in extremely slow download speeds), so unless there are additional technological breakthroughs it’s probably not going to really compete with a lot of higher-quality broadband — it’s more of a solution for folks who really need it: Those who were already stuck with either the previous iteration of satellite internet, which uses larger satellites which are much further away and suffers from slow speed and high latency and extremely high cost, or with almost-always-inadequate DSL service using phone lines.

Still, just reaching the currently unreachable could become a very good business over time, even if it doesn’t revolutionize the lives of everyone or destroy the cable and wireless companies. Earlier this year some analysts were reporting that SpaceX, in part due to good success with government and large mobility customers (airlines, etc.) was likely to top $6 billion in revenue this year, with $2.4 billion in EBITDA. So it may be profitable, and it is certainly big enough to go public if Musk decides he wants to spin it fully out of SpaceX.

And Altucher finally gets to some specific clues:

“Starlink will be one of the biggest internet disruptions of our lifetime.

“It could change how the world receives internet access… put giants like Verizon, AT&T and T-Mobile out of business… and ignite one of the greatest innovations of the 21st century.

“And this is your first-ever chance to get in pre-IPO… directly along with other insiders.

“You see, I’ve identified a hidden company working directly with Elon and Starlink to roll out his plans.

“Let me explain…

“Just recently, one of Starlink’s test users uploaded a video of a ‘teardown.’

“That’s when you disassemble a new tech product to see what’s inside.

“And that teardown gives us a major clue about what Elon is using to connect users to Starlink.”

And he shows an image of the Starlink ground station…

“As you can see, the Starlink device contains a special antenna…

“And this antenna is built using parts from one small, off-the-radar company… a company you can invest in today.

“A few years back, this company quietly inked a massive deal with Starlink…

“They became a major supplier of Starlink, agreeing to manufacture 1 million terminals at a price of $2,400 each!

“Said in another way, that’s a massive $2.4 billion deal for this tiny company!

“But that’s just the start…

“As tech adoption accelerates and more people switch to Starlink, the potential for this company could be huge.

“After all, they’re the ONLY company in the world that can make these components.

“In fact, Elon himself has even praised this company and their technology, calling it ‘one of the most sophisticated pieces of electronics’ he’d ever seen.

“As soon as Starlink IPOs, my research indicates this stock will take off into the stratosphere.”

So that’s what he’s dangling as bait, with his “special report” called “‘Super-IPO’: The #1 “Backdoor” Starlink Play to Buy Now”?

Thinkolator sez this must be STMicroelectronics (STM), which was indeed, as reported by teardowns and some leaks from insiders the contract manufacturer and chipmaker for the first million Starlink ground terminals (I don’t think either company ever confirmed that). Starlink has reportedly built well over a million of those terminals over the first few years of Starlink’s commercial availability (the first Starlink satellites were launched in 2019, the beta service became avaialble in mid-2020, so perhaps STM did receive $2.4 billion.

Is STMicro “off-the-radar” or “small,” as Altucher teases? I wouldn’t say so, it’s been a leading European chipmaker for almost 40 years now, and is a large cap company at about $25 billion in market cap, with roughly $17 billion in sales last year… but “small” and “off-the-radar” are subjective terms — the reference to the “only company” who supplies these components to Starlink, and the $2.4 billion price tag for the first million terminals, at $2,400 each, is specific and not subjective, and the only company who has been connected to Starlink as a supplier of that hardware over the past five years is STM. So that’s our match.

In case you’re curious, there are no genuinely small key suppliers of Starlink hardware that anyone has ever identified, to my knowledge, and like most Musk companies they seem to keep much of their design, assembly and parts production in house (to be clear, there are a lot of chips in the various Starlink hardware kits which have been developed, beyond that first generation dish which was reportedly made by STM and included mostly their satellite receiver chips, but none of the other providers identified in other teardowns are small, and none are specifically levered to Starlink… which makes sense, because even if they sell a million or two units a year, the chips, which probably cost something like $10-20 each for the more expensive ones, are not generating enough revenue that it moves the needle for other large semiconductor companies like On Semiconductor, MediaTek, Micron, Texas Instruments or Infineon, all of whom have revenue in the $8+ billion range and would not be particularly impacted if they happen to have $20-50 million in annual sales to Starlink).

So the bad news? STM was arguably the most important supplier for that first batch of user terminals… but it hasn’t done them much good. And we have no idea whether STMicro is still building any antennae for Starlink (which now has its own factory, too, something that wasn’t true when this deal was first discussed back in 2020), or what they might be making for selling chips to Starlink today, assuming they’re still a supplier at all (they probably are)… though we do know that Starlink has said they’ve gotten their hardware cost down to about breakeven more recently, so they presumably no longer have a cost of goods of anywhere close to $2,400 apiece for these terminals, like they did with that (reported) startup order with STMicro, it should be down below $500-600 now.

Why isn’t this Starlink relationship doing them much good? Well, aside from the fact that the cost is almost definitely coming down, and STM might not be making them at all anymore, and that it’s not a high-enough volume product to make a ton of money even if there are hundreds of dollars of chips going into each ground station… it’s mostly just because STMicro is a big company, and Starlink was never anywhere close to being their biggest customer. They are primarily a chipmaker for electronics, industrial and automotive customers, and many of their end markets are in a slump. And they’re small compared to the largest chip companies, but still very large by most measures, with annual sales of about $17 billion last year, so the work they might still be getting from Starlink isn’t even close to being enough to really move the needle. Or to make up for the fact that slumping auto and consumer electronics demand is leading them to probably see a 20%+ drop in revenue this year (STM had $17.2 billion in revenue in 2023, the 2024 estimate is now $13.5 billion, after a rough earnings report which included a forecast cut back in July).

Neither company has confirmed that $2.4 billion number over the first few years of Starlink terminal production, but even it it’s true that was never enough to make Starlink a very large customer for STMicro — as of 2023, the only customer they name as a major buyer is Apple, which has been their largest single customer for a long time and accounted for about 12% of STM revenue in that year (down from 17% and 20% in the previous two years, when Apple sold more computers, iPads and iPhones).

And perhaps one very small part of the reason for STM’s disappointing year in 2024 could be that Starlink is no longer outsourcing all its assembly of Starlink Terminals — they built their own factory in Texas that was completed last year, and it sounds like most of the hardware is probably coming out of that factory now… they’ve far surpassed those first million terminals built, a number they reportedly hit in mid-2022, and the estimate is now that there are more than three million customers connected to the Starlink network. Some of those use more sophisticated and expensive antennae, like their marine and aviation versions, but probably most are still buying the standard Starlink ground station. And I haven’t seen any recent teardowns, but probably STMicro is still providing most of the chips for the antennae to SpaceX… but that’s not a mega-volume business, and presumably it’s a much a lower revenue business than providing the fully assembled terminal (which itself was not really enough to have a big impact on STM earnings over the past four or five years). A lot of that is based on leaks and guesswork from reporters who follow SpaceX and Starlink, since SpaceX is still a private company and doesn’t report much detail about their business.

STMicro is still big, and they’re still profitable, and they might even be cheap at about 16X forward earnings (and 8X trailing earnings)… but if they “soar” in December it won’t be related to enthusiasm about a potential Starlink IPO, it will be because Bosch, Continental and, yes, maybe even Tesla ramp up their orders of chips for automobiles. Or because semiconductor demand soars for other reasons, like a return to growth for their orders from Apple, or Samsung, or HP or Huawei. STMicro does have a broad customer base, and they make all kinds of chips, but most of their end user demand is for chips that go into industrial equipment and autos, where they may have an edge because of historical relationships and built-in designs, not where they are the only possible supplier.

To some degree, STM was rejuvenated by the increased chipification of cars starting a decade or so ago, and also boosted by overall chip demand growth in general and by their Apple relationship, but it has long been a disappointing investment since it was created as a “European Champion” in the chip business in the late 1980s, partly because that position led to some “meddling” by the French and Italian governments from time to time. Even if you skipped the dot-com bubble and bought in after the crash, near the lows in October of 2002, the results would have made you a little sad — the’s the share price of STM in purple, and their revenue per share growth in orange, compared to the performance of the S&P 500 in blue:

And remember, that’s a chart which starts AFTER the dot-com crash — after the stock fell from $70 to $13 or so. It has never again gotten back to that 2000 peak.

Things did get better for a little while, and the stock was briefly popular for parts of the past five years or so, as the semiconductor business picked up. Earnings failed to grow for more than a decade after the 2000 crash, but finally started to increase again in 2016 or so, with earnings per share finally getting back up to the levels they enjoyed in 2002, and the stock climbed into COVID, then soared because they were pretty ready and well-stocked when automotive and other chip demand went crazy during the COVID shortages.

But over 22 years, the results are quite disappointing… and even in more recent years, STM has been a very below-average semiconductor stock — they jumped in early 2023, when everyone was getting revved up about NVIDIA and ChatGPT, but after that initial excitement they failed to really participate at all in the past two years of AI enthusiasm, mostly because they didn’t really see any sales growth… and Starlink, of course, was nowhere near being a big enough business for them to make a difference anywhere along the road… that’s the Philly Semiconductor index in green, reflecting all that AI enthusiasm and led by NVIDIA, Broadcom and others, along with the S&P 500 in blue, and you can see STM faltering at the bottom in purple, mostly because of that drooping sales line in orange (and the fact that the sales number is expected to droop even more in the next few quarters).

So there you have it, friends — newsletter guys love to pitch “secret” ideas about a “backdoor” way to make money that you couldn’t possibly find on your own… and it sounds to me like James Altucher is just using a high-visibility event, the possible IPO of Starlink, to make a pitch for new subscribers… and the fact that there’s no real opportunity for any potential Starlink IPO to actually have any impact on STMicro wasn’t enough for him to give on on that exciting “backdoor IPO” story.

Will Starlink IPO sometime soon? No idea… it was widely reported as potential for 2024, since we know that Musk has said in the past that they’ll spin it out and IPO the company once it’s got sustainable cash flow, and the company might well be at that point now. But Musk has also said specifically that there are no imminent plans for a Starlink IPO, so it could also be years away. Either way, it’s not likely to matter for STMicroelectronics or impact its share price anytime soon.

That’s just what I think, though, and with your money on the line you get to make the call — thinking of buying STM as its revenue perhaps troughs this year? Excited about the possibilities for Starlink for other reasons? Let us know with a comment below… thanks for reading!

Disclosure: Of the companies mentioned above, I own shares of NVIDIA. I will not invest in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.