It’s been a long, volatile trip for AST SpaceMobile (NASDAQ:ASTS) stock, but today, there’s only a frustrating failure to launch. I am neutral on ASTS stock because some giant companies are reportedly prepared to invest in AST SpaceMobile, but a sizable stock offering might be a bad sign.
AST SpaceMobile isn’t exactly like other space companies you may have heard about. It doesn’t launch wealthy customers into space for leisure flights. Instead, AST SpaceMobile operates a space-based cellular broadband network for mobile phones.
That’s an intriguing business concept, and you might be surprised to find out which big companies are interested in AST SpaceMobile. On the other hand, there’s a difference between trying out a business concept and actually making it financially viable. So, let’s delve into the positive news first before considering the major issues with AST SpaceMobile.
Which Famous Companies are Investing in AST SpaceMobile?
You may have noticed that ASTS stock is deep in the red today. However, the stock actually popped briefly on the news that several famous companies are investing in AST SpaceMobile. Will this inspire you to buy a few shares?
That’s a personal decision, but it’s certainly noteworthy that AST SpaceMobile announced new financing of “up to $206.5 million in gross proceeds.” Whether this financing will be enough to solve AST SpaceMobile’s financial shortcomings is another issue – but for now, let’s focus on the positive news.
Part of the new financing comes from existing AST SpaceMobile investor Vodafone (NASDAQ:VOD). U.S.-based investors might not be very familiar with Vodafone, but it’s a large telecommunications company in the United Kingdom (UK).
AST SpaceMobile also has two new investors. One is AT&T (NYSE:T), and the other is Google owner Alphabet (NASDSQ:GOOG) (NASDAQ:GOOGL). Therefore, this news item is more significant than just the dollar amount of the total investment.
Indeed, it’s a vote of confidence in AST SpaceMobile from these huge companies. Bear in mind that these big companies don’t just invest millions of dollars without conducting extensive due diligence. At the same time, none of this guarantees that AST SpaceMobile will thrive as a business venture.
On the other hand, these companies may envision AST SpaceMobile facilitating the build-out of a hyper-growth telecommunications market. As Vodafone CEO Margherita Della Valle explained, “Customers in remote rural areas, on land or out at sea, will be able to benefit from fast and reliable 5G broadband directly to their existing smartphones without the need for specialist equipment.” That’s certainly worth considering, but now, let’s look at the bearish side of the debate.
Here’s Why ASTS Stock Tanked Today
The announcement of strategic investments from the likes of AT&T and Alphabet ought to prompt an all-day ASTS stock rally, right? That might have happened if it weren’t for another disclosure from AST SpaceMobile, which made some of the company’s current shareholders unhappy.
AST SpaceMobile first announced the pricing and then the launch of a $100 million common stock offering. Additionally, AST SpaceMobile “will grant the underwriter a 30-day option to purchase up to an additional “$15 million worth of common stock shares” at the public offering price, less the underwriting discounts and commissions.”
I’ve said it before, and I’ll say it again. Once a company goes down the path of potentially diluting the value of existing held shares through a large-scale stock offering, there’s nothing stopping the company from resorting to this capital-raising tactic again and again in the future.
In other words, a quick capital infusion is gained, but some trust among the current shareholders is lost. This explains why ASTS stock dove 25.7% today; just imagine how much further down it might have fallen if AST SpaceMobile hadn’t also released the news about AT&T, Alphabet, and Vodafone’s strategic investments.
Speaking of financial issues, I should also address AST SpaceMobile’s lack of positive earnings, along with the company’s failure to report any revenue in 2023’s third quarter. Moreover, it’s troubling that AST SpaceMobile reported a net loss attributable to common stockholders of $20.909 million in Q3 2023 versus a loss of $9.766 million in the year-earlier quarter.
Is ASTS Stock a Buy, According to Analysts?
On TipRanks, ASTS comes in as a Moderate Buy based on one Buy rating assigned by analysts in the past three months. The average AST SpaceMobile price target is $23, implying % upside potential.
Conclusion: Should You Consider ASTS Stock?
By now, you should get the idea that AST SpaceMobile’s financial situation isn’t ideal. Also, the company’s current stockholders probably aren’t pleased with AST SpaceMobile’s new share sale.
On the other side of the argument, several notable names are willing to invest their capital in AST SpaceMobile. That’s encouraging, but it’s not enough for me to consider a share position in ASTS stock right now. Consequently, I’m staying on the sidelines for a while and awaiting further developments about the firm.
