SpaceX’s 40% Rally Explained | Inside Apollo’s £5.7bn EasyJet Deal

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0:25Anthony Cheung: Hello and welcome back to the Market Maker podcast and today we are going to do a double header covering three stories on today's show and then doing a special summer bonus episode which is going to drop a few days after where we'll deep dive into all things about Boeing and drones. But today we're covering some familiar territory, we're going to do some deep dive into some technical stuff around SpaceX, who I'm sure you've all read because it was very much even in, you know, when it starts to cross over from financial media into the mainstream outlets, about a 40 % rise in a share price like SpaceX, then obviously the media can't get enough of it.

1:08Anthony Cheung: But what we wanted to explain was this concept of staggered lockups, because it's something you're going to read about consistently for SpaceX. And then as an update following a lot of positive comments we got for the EasyJet episode. Who would have thought, Stephen? EasyJet, one of the most popular episodes we've done of late. Argus closely following suit, though, I must say. But EasyJet and the dark arts of PE financing, and I'm going to bring it a little bit closer to home. Third story we'll cover today about the announcement of Cambridge Aerospace's$300 million Series C fundraising, valuing the UK tech company at over 3 billion US dollars.

1:47Anthony Cheung: Not bad for a company that's only two years old. And who thought that, you know, or who said that the UK can't produce world beating technology firms, Stephen? Well, absolutely. And, you know, it's Cambridge, so it's going to do some good stuff. There was an interesting report that came out that said that startups coming out of Oxford receive 20 times more funding than any other university, which put my neck out a little bit, but Cambridge Aerospace, 300 million. Here we go. All right. Well, before we begin, two questions for you that I have, non-related to everything I've just said. One, solar eclipse.

2:27Anthony Cheung: Where were you? What did you think? Were you able to look at it properly, safely? And then two, what's happened to the rest of your head where your hair kind of run off to where's your boom pong gone yeah so they're not into they're not interconnected these two stories but you know hopefully if you are based in i think the northern hemisphere you would have got to see some of the partial or full solar eclipse and that's why we're talking about being up in the air in this double header we're doing everything up in the air whether it's spacex or easy jet or cambridge aerospace or boeing in the second part of our double header i wanted to kind of reference the fact that there's a lot going on up there uh i obviously being very unprepared and not particularly dexterous i didn't create any kind of pinhole colander thing me bob i just looked at it um burned my retinas a bit uh and then and then couldn't really see for the rest of the evening what about you well i've got a next-door Doesn't really have a great things to do with his day, I think.

3:38Anthony Cheung: So he was basically sharing his glasses across about five households of the children. So yeah, managed to get a good look at it. Oh, that's very nice. That's very nice. And yeah, to your second question, it's just too hot to have long hair. You know, it's obviously right in the 30s this week. And it was just getting me really, really annoyed. having to dry it, having to wash it, having to, you know, all of that stuff, right? I was sweating when I was taking the dog for a walk. So I just went into the hairdressers and said, just lop it off, get rid of it. They were a little bit concerned because like Samson, it's my power.

4:18Let's see if this podcast is terrible, right? It could be awful.

4:21Anthony Cheung: I thought you were just doing some research, looking at like the Cambridge Aerospace website and started seeing some cool military hardware and thought you know what for this episode i'm gonna commit i'm gonna gonna shave the head i tell you what if there's one i've i've done quite a few things in my past if there's one profession i've never been interested in is going into the military but anyway despite my cool military haircut all right well look let's talk about spacex because obviously when we last spoke. I mean, it was you and I or myself and peers and the earnings came out and the share price kind of dumped at the time.

4:59Anthony Cheung: And you're thinking, wow, there's a lot of people that got ironed out in that buying the IPO, particularly in the retail space. And we're claiming happy days when we're up at 220 and then we got hammered. But since that low, we've had a rally of, I just double checked it because I wanted to get the latest. It's almost 40 % now. So it's gone above its IPO price of 135. We clocked yesterday at around$141. So we're back to just a whisker off the 2 trillion valuation. So yeah, I mean, a lot of people were, and this is really the crux of our conversation on this story. A lot of people were worried though, particularly around people having access to sell.

5:46Anthony Cheung: So what do we mean by this and this concept of a staggered lockup period? Yeah, so this is a really, really good opportunity to do a little bit of learning about equity capital markets key concepts, right? As we've discussed previously on the podcast, if you do an initial public offering, the institutional investors, the founders, the existing shareholders tend to have a lock-up period of usually 180 days fixed lock-up period and before that they cannot sell or dump their shares so in the case of SpaceX they they created new shares to sell and raised about 86 billion dollars and then at certain periods there is an opportunity for existing investors and founders and management to sell their shares.

6:43Now, SpaceX has done it very, very differently to the typical vanilla 180 days and all of the institution investors, all the existing investors can sell. They have pursued what's called a staggered lockup period. This means that there are periods of time, there are deadlines and timeframes and criteria by which more shares that are held by existing shareholders have the opportunity to be sold, to be part of the free float. So if you remember, they originally had 4.9 % public float, which is extremely low, right? Compared to Microsoft, 99.98%. And that potentially artificially distorted the valuation of SpaceX and made it much more volatile because small trading volumes were affecting a much larger total share base.

7:45Now, after the release of the Q2 results, which we've covered previously, that was a mark in the sand whereby investors existing shareholders could sell a lot more of their shares so the public float went from 4.9 percent to 11.8 percent that's 911.5 million class a shares that have the potential to be sold that weren't able to be sold before. So in the kind of simple logic of supply and demand, you suddenly got the potential of a heck of a lot more supply, i.e. existing shareholders wanting to sell, maybe cashing out some of their gains, maybe they were venture investors back series B, series C, Series D, and this is their opportunity to sell some of their shares.

8:50So the fear leading up to the first of these staggered lockup periods, the fear was that this would just release a glut of supply onto the market, which obviously when there's a lot of supply and not enough demand to hoover it up, that pushes the share price down. So if you were looking at the share price three or four weeks ago before this lockup period, you would see the share price right down in the doldrums, right? I don't know what it was down at.

9:20Anthony Cheung: What low did it hit? I think it got close to 100 at the time because even I was sniffing about then. Even you were sniffing about, that's interesting. You heard it here first. That is very interesting. So yeah, so it was way down in the doldrums so the theory was you know spacex share price was going to get totally hammered post this staggered locker what happened yeah so when like i say i think there's thinking retrospectively of when pre this company being listed i mean there is just crazy amount of demand for this particularly on the retail and a classic retail investment strategy is by the dip I mean, that's kind of the same principle for the index level on the S &P, whenever there's a big pullback and we get these kind of opportunities to re-enter a long position.

10:18Anthony Cheung: And I just think a lot of retail people would have got involved at that around 100 level, of which evidently would have been the case. But it's interesting as well. I wonder whether, I don't know, if it hadn't been for the stock price drop, it was almost like the sharp drop of almost, what was it, 20 % or whatever post earnings was almost the best thing that could have happened prior to there being then a recalibration of, well, what's fair value for this in terms of it was trading at 220. it's now discounted to 100 basically so i think you just had a lot of demand just come in at that point hoover things up and yeah such a phenomenal rally nearly 40 as he said at the top of the show but i guess my question is when you hear the word staggered i mean my my psychology goes to like you said about these these equity capital market kind of bankers surely you stagger because you're worried so the psychology being is it not just a negative thing like understand the mechanics of it um it's a really interesting one you explain that it's a really interesting one there's a couple of explanations and i think you're right to the extent that there is a bit of a concern that if all of these shares became available at once after 180 days that would be that would potentially be the moment in the markets for that particular year, right?

12:01Because it's such a large company. But, and I like the FT's analysis of this, a conventional lockup is akin to ripping off a band-aid in one go. That's what the market knows. It prices it in a couple of months before. We all know that this thing is going to come. Whereas this staggered lockup results in a great deal of uncertainty, as we've seen in the last few weeks. Share price drops, maybe in anticipation. Then it rises again because no one actually wanted to sell their shares because the share price had dropped. So it's this kind of a little bit of obfuscation, a little bit of smoke and mirrors, just bleeding these shares out into the market very, very slowly.

12:44And I think the biggest reason for this staggered lockup, quite frankly, is the fact that the free float it was only 4.9 % on IPO. So they've got a lot of percentage to get back into that free float

13:00Anthony Cheung: over the next couple of years, right? Just thinking about from a trading and investing perspective, what you tend to see is the markets become desensitized the more it sees something. So the greatest cliff of uncertainty is the one that just happened. So even though the lockup amount of shares that might come to market might even get bigger. The idea here is that the biggest unknown was how was the market going to receive the first tranche, if you like. We now know that, so the level of uncertainty has narrowed, meaning less uncertainty equals more confidence in that sense. So that's what we tend to see from a trading perspective with these types of things.

13:41Yeah, and it's really interesting. So why wasn't there a slump? Well, the first reason is that yes, more shares are available to be sold, but that does not mean that existing shareholders are selling. They don't dump automatically. And if the share price is down, and if these institutional shareholders, institutional investors are still bullish on SpaceX, they're going to hold. They're not going to want to sell at$120,$110 a share, which is such a strong signal to the rest of the market that this thing is well-priced.

14:18Anthony Cheung: so reason number one the supply never came on board right totally agree in the sense of institutional money is not day trading like they they they're in this company they're not going to get out of it at the first possible moment like they're tied to it at this point so if anything that would give the retail by the dip army even more confidence that this thing you know they're going to dump it in in such an aggressive fashion yeah so number two buy the dip you're absolutely right and then there's a there's a couple more this is not investment advice yeah i'm well well out of my pay grade here number three number four my reasons for why this thing actually bounced instead of dropped bearing in mind that there's potential supply flooding into the market number three, the simple mechanics of index funds.

15:08So index funds buy a company based on its relative free float as a percentage of the overall index. So the fact that SpaceX has gone from 4.9 % free float to 11 plus percent means that NASDAQ needs to buy more shares to have the appropriate representation or weighting of SpaceX in their index. So that's a kind of, that's a counter balancing buying signal. And then the fourth one, what happened to the shorts? And this is where, this is where I need your markets, markets head. So I know that there was a load of short interest in SpaceX leading up to this staggered lockup. There was a, I think something, something ridiculous like 34 % of the shares available for public trading were shorts so what's what's going on there and tell me about a short squeeze what happened yeah so I think what this is alluding to

16:17Anthony Cheung: is that there's a lot of people in the market thinking like we've we've done all these space deep dives and you're going this business model this valuation is farcical so I'm gonna only short this stock so you might have these hedge funds who have these open short contracts looking that ultimately push the price and that is going to to move lower what happens though is then old retail bob army and his mates get hold of this which is what which is a dangerous game like what we saw with gamestop which has a similar type of demographic you could say from a retail orientated perspective, given what Elon's engineered.

16:56Anthony Cheung: And then the stock price starts to go up. And as it starts to go up, their short is getting more and more offside to the point where there's too much pain. Or like we saw with our dear friend Leopold at situational awareness, the broker calls you and goes, right, you need to stump up some more margin here because you're so offside. If you want to hold that position, we need some more money. Some can hold, many can't. in order to get out of your short, you need to buy back to net neutralize your position. So you add to the buying pressure or the buying move higher and the market starts to then just kind of gap up, launch higher, like what we saw with GameStop.

17:38Anthony Cheung: Obviously, it's a much bigger stock, so lesser degree. And that just further gives conviction to the retail buyer that absolutely, I was right. This thing's going up and then it compounds, gains momentum. Another added point I'd add, though, that I think is interesting that I didn't see in your list. Did you see Elon did that interview with The Economist, the editor of The Economist? It's all over social media. No, no, tell me about it. So basically, it's an hour plus long conversation where it's a very confrontational conversation, particularly at the end. It's obviously The Economist. So they're talking about kind of liberal type ideas and he's he's going against that and she's holding his feet to the fire and it's a good it's a good watch elon's a genius though he dropped that right in the midst of all of this action going on i looked at the comments because there's a couple of points where look i'm a i'm a fairly rational person and some of the things elon was saying i was a little bit like pretty punchy things he's coming out with.

18:47Anthony Cheung: I looked at the comments thinking people surely must be criticizing some of the things he's saying. There was thousands of comments and people lapping up what Elon was saying. It reminds me of Brexit where there's me sitting there in the city going why would you leave the EU? That's economic suicide. and then you go in the comment section hang about everyone wants to leave the eu it was kind of felt like that when i looked at this elon thing but elon like i said another another stroke of marketing genius i think he did that whilst all of this is going on that you've explained to galvanize the troops it's like a classic um what was it wall street bet kind of call to the army it almost felt like and they would have loved that and i'm sure that would have converted you would have had a conversion to spacex share sales based on that and i think again that the anecdote is very instructive i think if you've signed up to the ft or the economist you tend to get a relatively smart readership so the comments the comments are something that i go to sometimes before the actual article because you'll there'll be some there'll be some article and then one of the comments is like i'm a hedge fund manager based in dot dot dot and this is my opinion you know actually this is you know this isn't just dross this isn't slop coming out of it's not trolling it's actually really really good and it gives you that flavor the mood music right okay so going further forward though this is not the first or last time this is going to happen so how much visibility do we have as market participants of knowing the structure of the staggered nature of this yeah so it's relatively clear it's all set out in the prospectus so we know that over the next few months there are going to be staggered releases and we can potentially share a chart that the ft alphaville did that shows the free float that's going to become available post august 2026 post where we're talking about now and it comes out little stagger little stagger a little stagger and then in June 2027 it's Elon day so this was this was a year after the IPO and this is when Elon can effectively get rid of all of his shares you know and the free float can be up to 99 100 so not that he will but that's the big cliff that is quite you know quite interesting in this chart.

21:32Anthony Cheung: Do we have any marker of success on how well as a strategy staggering this has been for other firms?

22:07Yeah, so the one that keeps getting reference is Cerebrus. And I don't know if you guys covered it in the markets podcast, but Cerebrus was a blockbuster IPO earlier on this year in May. I think they raised$5.5 billion and the share price skyrocketed after the first day. I don't really understand what Cerebrus does but reading the article it says that Cerebrus technology uses entire sheets of silicon to make a chip the size of the dinner plate or 58 times larger than NVIDIA GPUs. Doesn't mean much to me but sounds pretty cool. So anyway so this was a classic staggered lockup 7.5 percent of eligible shares on the first trading day to non-executive employees.

22:53Then if the stock pops above 33 % after the first day, which it did, they can release another 7.5%. Directors can sell 15 % of their shares after the company reports first quarter and more things go on and on and on. And obviously Cerebra's share prices dipped over the last few weeks, but I think it's, you know, I think it might become the new normal especially with really really well hyped quite frothy valuation companies that need to kind of uh maybe need to stagger some of that release of supply into the market

23:29Anthony Cheung: with you saying that then so what like anthropic for example i mean i know we'll probably pass a comment on that shortly but one of the things for them you know will they won't do a staggered sort of thing but run rates is something that we've talked about before with anthropic i saw some headlines about run rates at spacex so maybe to conclude this segment what's the actual you know under the hood performance or at least information that we're aware of at this point of how spacex is performing as a business uh it's really interesting and again i listened to your fantastic podcast with peers on the world of CoreWeave and NeoClouds and all of this stuff and just thought about that order book of$130 billion off a quarterly revenue of$2.85 billion.

24:21And I thought, wow, this is either the best thing in the world or it's a total disaster, which I think is what a lot of people are thinking. But SpaceX say that they are going to get to$100 billion of annual recurring revenue by the end of this year. Bearing in mind that their annual run rate revenue is 30 billion, that is a more than 3x jump in four months. I think maybe six months because that 30 billion was back in June. So a lot of things have to fall into place. And what I love is, again, just reading a comment from Deutsche Bank, who are just team SpaceX. They call it the apex of civilizational ambition, oftentimes expressed in steel and fire, bending the arc of history to make humans multi-planetary by building foundational infrastructure across transport.

25:14I mean, Deutsche, you just want some fees. Come on. So there's all of this, you know, and again, the FT Alphabet is wonderful expressing this in memes, but there's all of this hype, you know, are they going to get to 100 million of ARR? by the way ARR only means you take one month and extrapolate it for the whole year so it's not 100 million of confirmed revenue who knows it keeps us in a job end that's all I'm saying

25:41Anthony Cheung: yeah certainly does and let's move on then let's talk about the easy jet one I did mention at the top of the show that this is something that you know surprisingly it was interesting to us but other people found it interesting too so perhaps there's a bit of an update because I believe we have a winner. Aha, yes. So I think when we last did a deep dive into EasyJet three or four weeks ago, we spoke about, we actually had the whole episode prepped for Castle Lake, the private equity firm, having a agreed successful acquisition of EasyJet or offer accepted of EasyJet. But the morning of the recording of the podcast, Apollo sweeped in and offered 5.7 billion pounds to buy the company.

26:27And that was accepted by all of the shareholders, including most importantly, Armand Stelios, the founder of EasyJet, who has really put his weight, not physically, his shareholding weight behind the Apollo bid. And it looks to all intents and purposes like this thing is going to get through. But what I want to talk about specifically as an update, because loads and loads of offer documents and financing commitments have come out in the last couple of weeks. And for someone like me, who likes financing and likes private equity and kind of gets interested by this stuff, it's worth just revisiting EasyJet and just diving into what is the structure of this thing going to be.

27:13So just as a reminder, there were some regulatory issues that Apollo faced. Because EasyJet is an EU airline registered in Switzerland, Austria and the UK, you are not allowed to majority own a EU airline if you're not an EU citizen or an EU company. Apollo obviously is not. So what Apollo's done is it's created an acquisition vehicle like this, this always happens in private equity, called the Eagle Bidco, registered in Jersey. And Apollo is going to own 49.9%, right? So under the majority threshold, there is going to be a separate vehicle that is owned by the existing shareholders of EasyJet rolling over their ownership stake into this new vehicle of which Stelios who owns 15 % of EasyJet at the moment has said I'm going to roll over my entire amount right so I'm going to be the cornerstone of this other entity or this other part of the equity stack.

28:34Now existing investors can just cash out if they want or they can roll into this new entity and this new entity is going to own between 45.1 and 49.9 percent of easyjet so you've got apollo 49.9 this locally based european based ownership structure is going to own 45 to 49 and then there's going to be this this kind of trust that sits in the middle that is owned by employees and EU employees and managers that can own up to 5 % of the company. So at no point in time will Apollo own over 50 % and that 50.1 % will be structured between the existing shareholders rolling over, EU nationals and the employee benefit pool that is up to 5%.

29:31So it's a super sneak, well, it's not sneaky, it's just very, very clever. And to get Stelios on board is absolutely key, right? He's not cashing out, he's rolling into this new entity, which obviously gives credibility and a bit of heft to this 45 to 49%.

29:48Anthony Cheung: So I understand it's Barclays, PJT partner, Citi are advising Apollo, fee structure wise then the banker charging Apollo for this process given this sounds like it's not an unusual setup but probably fairly complex so does this get accounted for I'm assuming in the fees structure yeah absolutely and quite frankly any private equity deal has got levels of complexity right there are lots of SPVs special purpose vehicles that are created it is not as if Apollo, that has a£15 billion fund, they don't own these companies directly, they create vehicles, acquisition vehicles, that sit in between the fund, which funds the acquisition vehicle, and EasyJet, the entity.

30:47So there's always levels of complexity, this one will have more complexity. And it will be a combination of maybe the bankers getting paid a little bit more, but also, my gosh, Apollo, full of sophisticated people, they will be grinding their brains to figure out how to do this, speaking to the right people, maybe even doing a little bit of soft lobbying as well to make sure that this thing gets over the line.

31:11Anthony Cheung: I did read something in regards to the banks and the financing about bridge to bond facilities. I've not heard of that before. So what is that? Yeah, I really want to get into the financing structure. It's so, so interesting and it's so representative of a private equity buyout that it's worth spending a little bit of time on. So remember, this is a£5.7 billion acquisition. Let's start with the debt. So private equity firms buy companies with a mixture of equity and debt, equity coming out of their big private equity fund raised from big institutional investors like pension funds and endowments and things like that, and debt that comes in lots and lots of different shapes and sizes.

31:56So the debt structure, as has been announced, and we're still learning about this as we get more information, the debt structure is that£3.5 billion have been committed by Barclays, who's committing over a billion pounds, and we'll go back to that in a second, Citi, Standard Chartered, Lloyds, Credit Agricole. They've committed to providing 3.5 billion pounds bridge to bond facilities. So this is a bridge financing facility, so a short-term up to 12 month financing facility that often costs quite a lot for the acquirer. And it's relatively expensive, but it provides committed financing. So when I'm putting a 5.7 billion pound offer on the table, I need committed financing.

32:48I need a letter from the bank saying, we're going to basically underwrite this.

32:54Anthony Cheung: Like getting your mortgage approval to how much you can borrow from the bank before you can put a bid in on a house. Similar thing. Exactly. You need committed funds because otherwise you won't be taken seriously. So these guys, Barclays, Credit Agricole, Citi, Standard Chartered and Lloyds have said, we are going to bridge to a series of different bonds that are going to get out into the market over the next 12 months. So you've got, and there's a 250 page commitment letter, document that I wouldn't recommend that you read through. Thankfully, you have the likes of Claude to summarize it nicely for you.

33:34But you've got the commitments of all of these different banks. So you've got$900 million of commitments from the five banks to bridge to a floating rate note, and then three different other bridge facilities to structure to bridge to a euro denominated pound denominated and u.s denominated bond that they're going to get out in the next 12 months and then on top of the 3.5 billion they the five banks are providing a 1.3 billion dollar revolving credit facility, which is basically your working capital day-to-day facility, which is at a 3.25 % interest margin. So you put that all together and you've got effectively£4.8 billion of committed finance, which in the context of a£5.7 billion acquisition is upwards of 75-80%.

34:33So you're thinking to yourself, oof, this is typical private equity. Load the company full of debt And in fact, Moody's came out and downgraded EasyJet on the back of this financing structure to BAA2 citing a material deterioration of EasyJet's credit profile.

34:54Anthony Cheung: Is there some sort of agreement in the contract where the underwriters, so Barclays, are saying you can't get downgraded too much because then it's compromised as an asset as whether you can repay the debt? Well, absolutely, absolutely. And remember, these bridge loans, they carry a decent amount of risk, right? But the intention of DeFi banks is not to hold these loans for the duration of Apollo's ownership of EasyJet. So they just want to make sure that this thing doesn't deteriorate so quickly that EasyJet gets downgraded to sub-investment grade. And I'm sure, by the way, there will be conversations going on with Moody's and S &P going, how high can we flex this leverage to maintain an investment grade rating, right?

35:46Because you wouldn't want to go higher than that. But they still have 1.3 billion pounds of revolving credit facility commitments, which are risk. That's on their balance sheet. So of course, they don't want to saddle the company with so much debt that they can't repay, they can't pay interest on the RCF. And there's lots of different ways that you can structure that. But yeah, absolutely.

36:13Anthony Cheung: I just had a quick look. So someone like Barclays isn't so much competing. I don't think they're even in the top 10 for M &A advisory, but they are in the top 10 for debt capital markets, for example. Absolutely. I mean, Barclays have had a brilliant payday with this right they're advisors on the mna so i think that's they're up 43 this year from a mna perspective uh on the league tables so they're getting there they've had a few years in the doldrums but yeah i mean they've got a big balance sheet putting out you know almost i think 800 million pounds at the bridge facility and bearing in mind by the way in the world of debt you get paid an arrangement fee which is kind of a fee for doing business which is usually you know 20 basis points or 50 basis points or whatever it might be on the total amount and then you get the interest income so you've got that on the bridge and then they're committing 300 million of the revolving credit facility which has a 3.25 percent interest margin so barclays oh my gosh all in this is tens of millions so saddle the company with some debt and then strip it back max maximize its profitability.

37:29Anthony Cheung: What's Apollo's plan here? When I think about EasyJet, how much more can we skin this cat in order to juice it for some more money? I thought Stelios has already done that to like the second third order. Yeah, it's an interesting one. I just very quickly want to touch upon the equity part of this capital structure as well, just to kind of round that off. So obviously a load of debts going into this company, but Apollo is obviously providing some equity as well. What tends to happen in the world of private equity is the majority or a significant chunk of the equity that a private equity firm puts in is in the form of preference shares.

38:10And preference shares, for anyone that hasn't explored that concept before, feel kind of like a hybrid debt equity instrument because they carry, in this case, in the case of EasyJet, a mandatory 14 % cash dividend rising to 15 % if it goes unpaid and gets piled up in a payment-in-kind note with redemption rights structured to deliver a minimum of 1.5 multiple of invested capital. So what Apollo is basically saying is you've got all this debt that has to get petted out first, has to get repaid. They're always senior. Then underneath the debt, you've got this thing called the preference shares, which have to get paid out a minimum amount before the common shareholders, the likes of Stelios and all of the other investors that have rolled into this vehicle, are going to get anything.

39:09So it basically guarantees a billion quid or 750 to a billion quid of Apollo's equity ticket, a 14 to 15 % cash coupon, which saddled on top of all of the interest payments on a debt is going to weigh pretty heavily on EasyJet. So they need to perform really well.

39:33Anthony Cheung: Any quick wins that you think that Apollo will be doing in order to get the business firing? Well, they say they're going to update the tech platform, so that's cool, whatever that means. They're talking a lot about premium seats and interlining. So again, we did this deep dive into airlines. We didn't quite cover interlining, but this is the collaborations with other carriers so that you can offer EasyJet flight to Hong Kong in partnership with Emirates. and EasyJet will do the first leg and Emirates will do the second leg. But in order to be able to do that, you need to offer a minimum standard of comfort for a partner carrier to go, yeah, we can get on board with this.

40:21So there's a lot, you know, this is interesting, but it's just not being part of EasyJet strategy. It feels like to me, there were probably some operational organizational gains to be had, but I wouldn't mess with the strategy too much. Quite frankly, if they get the financing play right, this company is very profitable. If they get the financing play right, they'll still make a lot of money without having to do anything too transformational from a strategic perspective.

40:52Anthony Cheung: All right. Final story then is Cambridge Aerospace. And as soon as I saw this name pop up as a talking point, I went on their website. Their website. I was like, it's just literally nothing. I was like, have you got the research for this? I mean, I didn't spend a great deal of time doing it, but I was just like, go to the website, have a look, because I want to see some of this cool tech and gear that I've got. And I was met with, literally, it's like a hedge fund website. Yeah, I mean, it's a bit of a blow to any marketing and brand agency that these guys have just raised$300 million at a$3.4 billion valuation.

41:35and they have spent one cent on their marketing.

41:39Anthony Cheung: Or it goes to show the world of geopolitically that we live in, that there's just so much tangible demand for this stuff, that why waste your time with the market? That's just not needed. Yeah, they're not going to be faffing around with marketing and the website is so interesting. It's such a power play to have nothing on your website. It's, again, it's a very hedge fund thing to do. But anyway, the story is Cambridge Aerospace obviously launched out of Cambridge a couple of years ago, raising$300 million Series C, led by this growth equity company, US growth equity company called DFJ Growth, founded by Randy Glein.

42:21There you go, great American name. But they've invested in the likes of Angeril, Stripe, SpaceX, Tesla, Sironic, anything controlled by Elon, basically. And you know, they're a true American firm. I was reading what type of companies they're interested in. Not that I've got a company that could fit their bill, but they give this lovely little spiel about how they're really interested in outliers and frontier technology. And the little letter on their website ends with, we hope this helps you understand a bit more about what we're all about feel free to give us a shout we're easy to find we're the ones looking around the corner and hoping to run into you randy what are you on about i was just having a quick look at randy's

43:11Anthony Cheung: background i was just interested it's like who's who's this geezer then and he's a he was an engineer at hughes aircraft company originally so he's an electrical engineer from the university to florida um then went to ucla but yeah he invested in spacex in 2009 oh well good for him good well randy take us out for some drinks come on um i'm gonna i'm gonna conclude this story very quickly um so this company cambridge aerospace raised 630 million since founding in april 2026 four months ago, they raised$200 million at a$1.3 billion valuation. Four months later, they're raising$300 million at a$3.4 billion valuation, 2.5x valuation increase.

44:00It's not, I mean, this story just goes to show that it's not all about AI and data centers and all of that hyperscalers and things like that. There's another world that's going on. And the key product that Cambridge Aerospace has is a low-cost interceptor drone built to counter these, I don't know if you've heard of them, the Shahed-type attack drones. So super cheap drones developed by Russia and Iran that cost hardly anything, but until Cambridge Aerospace came along, cost a lot of money to shoot down. So there was this kind of economic imbalance that you launch a drone for 40k but it'll cost 10 million dollars to kit to to intercept it so the demand for this stuff in this geopolitical climate is unbelievable and they're just right

44:55Anthony Cheung: place right time right and so what they raise the money now but ultimately this company's going to get bought imminently you would have thought by one of the big military players in the market us-based surely i just i just don't think it will i don't i think in this current climate in the in a trumpian anti-nato climate i think that the uk will do whatever it can to protect this company and west streetings who's the new defense secretary is all over this company thinks it's one of the greatest things that we've ever done so who knows your your intuition is probably sound but I think there'll be a lot of pushback just in this current climate.

45:40Anthony Cheung: Cool. Well, look, that wraps up, as we said, part one. Maybe just a quick finish from you, Stephen. What can we expect in the deep dive into Boeing? Because Boeing's not someone who, you know, would make the average man hot under the collar. So what can we expect? I wanted to do a deep dive onto Boeing, A, because there's some interesting stuff about their taxi drone units being sold to Archer Aviation. So if anyone's interested in flying taxis, definitely tune in on Wednesday. Love a flying taxi. But also the history of Boeing is so interesting. It's one of those classic stories of being run first and foremost by aircraft engineers, then getting run by beam counters effectively, and the quality control going out the window and all of the errors that we've seen over the last few years.

46:32So we'll do a little bit of a deep dive into Boeing, the concept of a duopoly with Boeing and Airbus being the two main players, and also some fly taxis.

46:43Anthony Cheung: All right, so stay tuned, subscribe, that episode will drop in the coming days and new episodes coming out, of course, on a weekly basis. So thank you, Stephen. Thanks everyone for listening. See you next time. Thanks, Ant.