ASTS Stock Drops 13% After-Hours As Dilution Fears Hit On New Debt Raise

• According to the company’s initial estimates, its total cash and cash equivalents and restricted cash stood at about $2.7 billion as of June 30. 
• AST SpaceMobile is developing the first satellite network capable of delivering direct-to-phone broadband service.
• Separately, Piper Sandler initiated coverage of AST SpaceMobile with an ‘Overweight’ rating and a $100 price target on Wednesday.

AST SpaceMobile (ASTS) shares plunged nearly 13% in after-hours trading on Wednesday after the company disclosed plans to raise significant new capital through the issuance of convertible senior notes, raising concerns of dilution for existing shareholders.

The company said that it intends to raise $1 billion through a private offering of convertible senior notes due February 1, 2034. The offering is subject to market conditions and is not yet priced or completed.

The company also said funds will be used to secure additional orbital access and explore partnerships or acquisitions to reduce reliance on third-party launch providers.

According to the company’s initial estimates, its total cash and cash equivalents and restricted cash stood at about $2.7 billion as of June 30.

ASTS’s Constellation Efforts

AST SpaceMobile is developing the first satellite network capable of delivering direct-to-phone broadband service. It has partnerships with major carriers and has successfully launched several BlueBird satellites. However, building a full global constellation remains expensive and capital-intensive. In February, ASTS had announced a similar $1 billion convertible notes offering, triggering another selloff.

AST SpaceMobile’s most recent launch took place on June 17, when a SpaceX Falcon 9 rocket successfully deployed BlueBirds 8, 9, and 10 from Cape Canaveral. These Block 2 satellites are now operational and designed to deliver peak data speeds of nearly 200 Mbps directly to unmodified smartphones, nearly double the performance of the company’s earlier Block 1 satellites.

AST SpaceMobile aims to have 45 to 60 satellites in orbit by the end of 2026 to enable continuous coverage in key markets, including the United States, Europe, and Japan.

Wall Street Weighs In

Separately, Piper Sandler initiated coverage of AST SpaceMobile with an ‘Overweight’ rating and a $100 price target on Wednesday. The fresh price target implies a potential upside of about 51% from the stock’s closing price on Wednesday.

According to data from Koyfin, two of the 11 analysts covering ASTS rate it ‘Buy,’ while seven rate it ‘Hold,’ and two rate it ‘Strong Sell.’ The stock has a 12-month average price target of $81.47, representing a potential upside of about 23% from its last close.

How Did ASTS Retail Traders React?

On Stocktwits, retail sentiment around ASTS stock jumped from ‘bearish’ to ‘bullish’ over the past 24 hours, while message volume increased from ‘low’ to ‘normal’ levels.

A Stocktwits user expressed disappointment at the “dilution over dilution” and said that the company’s management “can’t be trusted.”

Another user wondered what the company is going to use the capital for.

One more user highlighted operational setbacks, including launch delays.

ASTS stock has fallen 9% year-to-date. 

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