10 non-complex reasons why I never bought into EOS. The bear case.

1.      EOS is a glorified retailer. It sells large expensive items (military stuff) to large rich customers (governments). Retail entities have average margins and often have lots of competition.

2.      As a retailer with physical goods, then need to ship their goods around. As it is military equipment it is slower (border bureaucracy) and more expensive (weight + security).

3.      Having government customers isn’t always “blue sky”. The Australian Department of Defence is not large by comparison and EOS are unlikely to sell the volume that see’s multiples of value. i.e. RAAF have 10x planes, USAF has 200x planes (and over simplified example, but you get the point).

4.      EOS can’t expand into “unofficial” customers because of legalities. i.e. the latest dictator in Africa can’t buy their stuff to commit genocide in his or her local region. EOS also probably won't sell to the likes of China or Russia or other 'traditional' cold war enemies of the west.

5.      Government customers are slow and lumpy revenue customers, controlled by budgets and projects and personalities and bureaucracy and laws. Getting new customers is many years of paperwork sometimes. This makes for impatient investors.

6.      The coming generation of ESG investors. Hard to justify Ethical reasons for insto money, and Social … maybe that they provide local jobs to aussies?

7.      EOS will always have high R&D costs and potential failures (the risk of innovation). They don’t make rifles, they make complex sensors and equipment that requires coding, electrical engineer design and rigorous testing – i.e. sometimes destroying their product during testing, literally.

EOS three commercial sectors from their website:

8.      Space: Designs, manufactures, delivers and operation of sensors and systems for space domain awareness (SDA) and space control. (competitive)

9.      Remote weapons systems: Only small militaries buy these to protect their small number of soldiers, and small militaries buy in small quantities. Large militaries use soldiers to operate open air turrets, as large armies can absorb more soldier deaths.

10. Communications: Collinear appears to be an ISP (competitive), Spacelink is LEO and MEO satellites (competitive), EMSolutions is providing various comms stuff in a competitive area. Australian Government may purchase as it is a sovereign capability from a sovereign entity, however Australia doesn’t buy large volumes.

And these reasons are before one starts diving into actual reports and management etc.