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Why AST SpaceMobile stock just collapsed 12%
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Why AST SpaceMobile stock just collapsed 12%

AST SpaceMobile (ASTS -12.24%) The stock fell 12.5% ​​through noon ET Friday after the company reported a large earnings shortfall last night.

Before the report was released, analysts predicted that the new provider of direct-to-cell (via satellite) mobile communications would post a loss of $0.23 per share for its third quarter of 2024. Instead, AST said it lost $1 $.10 per share.

AST SpaceMobile Third Quarter Results

CEO Abel Avellan began the report by highlighting the “many significant milestones” AST has recently achieved, such as the successful launch of the company’s first five BlueBird satellites and their successful completion and start of “initial operations”. Avellan also noted that the company is seeking permission from the Federal Communications Commission to launch a beta service with AST customers. AT&T (T. 1.77%) And Verizon (VZ 1.40%).

The company has further signed launch agreements with several providers, including Blue Origin, with plans to put up to 60 additional BlueBird satellites into orbit in 2025 and 2026.

Things are going “as planned” – but that doesn’t mean AST is about to turn a profit.

What’s next in AST’s plan?

Furthermore, before AST can start making a profit, it must first put those satellites into orbit – and pay for them. With an estimated cost of $20 million to build and launch each satellite, putting 60 BlueBirds into orbit could require up to $1.2 billion.

The problem is that AST currently has just under $519 million in cash and equivalents. Management hopes new advance payments from customers will help close the gap. But since there’s no money coming in from revenue yet, investors should expect that AST will have to sell at least some shares to get the roughly $700 million it doesn’t yet have.

How much more stock? At a stock price of $24, AST may need to issue up to 28 million new shares to raise the cash it needs, potentially dilution of existing shareholders on 14% of their stake in the company.

Management hasn’t announced this yet, but you should probably assume that will be the case.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.