In the complex tapestry of technology investments, NextNav Inc. (NN) emerges as a compelling narrative of potential and innovation, a story brought to the forefront by Matt Sweeney of Laughing Water Capital in their Q4 2023 letter.
At first glance, NextNav might appear as an unconventional choice for a portfolio, especially given its origins as a SPAC (Special Purpose Acquisition Company) with lofty aspirations tied to the futuristic concept of flying taxis—a domain far removed from the core investment principles of many. However, a deeper dive reveals why NextNav has carved out a place in Laughing Water Capital’s portfolio, embodying a unique blend of technological promise and strategic acumen.
Central to NextNav’s value proposition is its ownership of 8 MHz of wireless spectrum in the coveted 900 MHz band, a critical asset earmarked by the federal government for Location and Monitoring Service (LMS). This strategic asset underpins NextNav’s dual business lines: enhancing the existing GPS network with vertical axis capabilities (essentially determining what floor of a building one is on) and developing a next-generation GPS system. This new system promises encrypted signals for security against spoofing and a robustness that resists jamming—features that have gained heightened relevance in light of recent global conflicts highlighting the vulnerabilities of current GPS technology.
Despite the skepticism surrounding NextNav, including a critical short report, the company’s innovative approach to spectrum utilization stands out. NextNav is exploring the potential to operate its LMS businesses on a fraction of its owned spectrum, with plans to repurpose the remainder for 5G broadband—a move that could significantly enhance the value of its spectrum assets. This strategic pivot towards broadband is timely, considering the FCC’s push for more spectrum availability to meet burgeoning broadband demands, coupled with the immutable law of physics that no new spectrum can be created.
The potential valuation of NextNav’s spectrum, even at conservative estimates, suggests that the company is severely undervalued. With shares purchased for less than 30 cents per MHz-pop—a stark contrast to industry valuations that could range from 2x to 7x or more—NextNav presents a compelling case for investment, even when adopting a cautious outlook on its valuation.
Adding to NextNav’s allure is the caliber of individuals and investors associated with the company, including Neil Subin, a seasoned spectrum investor with a track record of successful ventures and strategic exits. Subin’s involvement, along with other notable spectrum operators and investors in NextNav’s shareholder registry, underscores a collective belief in the company’s potential and the strategic value of its spectrum assets.
NextNav stands at a pivotal juncture, with plans to petition the FCC to repurpose part of its spectrum for broadband—a move that could not only validate its technological propositions but also unlock significant value for its shareholders. The anticipation of a favorable FCC decision, coupled with NextNav’s strategic relationships and groundwork, positions the company for a potential re-rating in share price and a redefinition of its market value.
NextNav represents more than just a speculative bet on futuristic technology. It embodies a confluence of strategic spectrum management, technological innovation, and the foresight of seasoned investors. In a market where data consumption’s exponential growth continues unabated, the intrinsic value of spectrum assets like those owned by NextNav is poised to escalate, making NextNav a compelling addition to a forward-looking investment portfolio.
DISCLAIMER: None of this is financial advice. This article was written based on information contained in a shareholder letter. None of the details have been verified. This article is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
