Why AST SpaceMobile Stock Just Crashed

AST SpaceMobile (ASTS 16.59%) has grand ambitions to offer broadband directly to smartphones anywhere on Earth. Building and launching the satellite array that will provide that technology costs money.

AST announced yesterday that it was raising additional funds to support its efforts. The stock is dropping today on that news, down 15.5% as of 11:07 a.m. ET. But investors have more to worry about than just the required capital.

Image source: The Motley Fool.

Raising money, rising competition

AST shares tanked today after the company said it was raising $1 billion through a private offering of convertible senior notes. The notes carry an initial conversion price of just under $80 per share. While that represented about a 20% premium over yesterday’s closing price of AST stock, investors may be thinking the company’s timing was poor.

Today’s Change

(-16.59%) $-11.00

Current Price

$55.31

Key Data Points

Market Cap

$20BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.

Day’s Range

$55.08 – $61.50

52wk Range

$36.08 – $133.86

Volume

1.3M

Avg Vol

22.3M

Gross Margin

-22429.27%

AST SpaceMobile stock has plunged by nearly 60% since late May, when it traded above $130 per share. Perhaps it could have done the capital raise at a higher conversion price in recent weeks, thereby lessening dilution by converting fewer shares.

Regardless, investors are not only concerned with the potential dilution; there is also competition from Space Exploration Technologies on the horizon. SpaceX’s Starlink has advantages in the rocket segment of that business, along with a vast array of already-deployed satellites.

AST said it will use the proceeds for growth initiatives and to “secure additional access to orbit for its space-based cellular broadband network.” SpaceX controls much of that access, which could be a bigger problem for AST shareholders than the capital raise that’s moving the stock lower today.