I don’t like wasting anyone’s time, so I’ll get straight to the point. So here are the three main reasons that led me to open a short position on Eutelsat. What I’m about to share is an excerpt from a deeper analysis I conducted.
1 - The news
As I was scrolling through the news feed, I came across a headline that caught my attention: a company had increased its value by 650%. I immediately thought it would be interesting to understand what had driven such a massive surge. When I clicked on the link, I had a flashback to a past short position I took on GameStop. I thought to myself, "Where there’s retail hype, there are always opportunities." But that wasn’t enough... I needed to dig deeper.
2 - The fundamental
The company has significant long-term debt, which I don't like as a source of financing, especially during periods of high interest rates, uncertainty, and with no apparent cash flow. Its valuation of $9 was excessive after the hype. I conducted a business analysis and a DCF evaluation, and I concluded that its true value couldn't exceed $4.
Eutelsat Group has a total shareholder equity of €3.1B and total debt of €3.0B, which brings its debt-to-equity ratio to 96.8%. Its total assets and total liabilities are €7.6B and €4.6B respectively.
In the end, price and value always align.
Another factor that led me to consider a short position was the comparison between Starlink's technology and that of Eutelsat. Analyzing their respective business models, there are substantial differences both in terms of technology and valuation. Starlink is a cutting-edge player in low-latency satellite connectivity, with a rapidly expanding network and a strong global strategic position. In contrast, Eutelsat appears tied to a more traditional model that seems less competitive in the long term. This disparity is also reflected in valuations: prior to its IPO, Starlink was already estimated to be worth around $150 billion.
3 - The timing
When I placed the order, the price was hovering around $7. At the same time, news flow was starting to question Eutelsat’s valuation, highlighting its evident overvaluation. For me, it was simply a matter of perfect timing. I set the profit target around $4, and the trade closed successfully. This marked my second profitable short selling operation of the year, following the one on Rigetti.
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