Why AST SpaceMobile Stock Just Plunged Over 16%

The surrounding story AST SpaceMobile (ASTS -17.14%) keep getting more and more curious.

In an article published on Wednesday, I suggested that after the dramatic increase in its share price in recent months, the satellite communications start-up should logically be selling a lot of shares now and raising a lot of cash.

Just hours later, AST denied any such intention, saying it had all the cash it needed to cover “short-term operational initiatives” and “does not intend to raise capital in an underwritten public offering of little by means of the end of 2024”.

And then came Thursday, when AST SpaceMobile filed a Securities and Exchange Commission (SEC) prospectus outlining its plans to sell $400 million worth of stock.

As of 1:54 pm ET, AST stock is down 16.8%.

AST wants $400 million

Adding to the confusion, there is still no sign of AST SpaceMobile’s 8-K filing or prospectus on the SEC website. If you want to know what’s going on, you need to go to AST’s own investor relations page.

And what will you find there? AST signed an equity distribution agreement with eight major investment banks “to sell shares of the Company’s Class A common stock” … “having an aggregate offering price of up to $400.0 million.”

Of course, AST says it is “under no obligation to sell any of the Shares” and “may at any time suspend” the sale – so the sale of shares may not actually take place. But despite the warnings, it certainly looks to me like AST plans to sell shares — seemingly contradicting its statement on Wednesday.

Explaining the inexplicable

Why AST might want to sell a lot of stock and raise another $400 million in new cash is clearer than the situation around it. AST is in the process of building and launching a constellation of satellites that will cost about $3 billion. It currently has only $440 million.

Whatever it says about its intentions, the math here is pretty simple: If AST wants more money, it needs to sell more shares — and dilute its current shareholders in the process.