Why AST SpaceMobile Stock Just Crashed 12%

AST SpaceMobile (NASDAQ: ASTS) stock tumbled 12.5% through noon ET Friday after the company reported a big earnings miss last night.

Heading into the report, analysts forecast the start-up provider of direct-to-cell (via satellite) mobile communications would report a $0.23-per-share loss for its Q3 2024. Instead, AST said it lost $1.10 per share.

AST SpaceMobile Q3 earnings

CEO Abel Avellan led off the report highlighting AST's "many significant milestones" recently achieved, such as the successful launch of the company's first five BlueBird satellites and their successful unfolding and beginning of "initial operations." Avellan also noted that the company is seeking permission from the Federal Communications Commission to begin beta service with AST customers AT&T (NYSE: T) and Verizon (NYSE: VZ).

The company has furthermore signed launch agreements with multiple providers, including Blue Origin, with the intention of putting up to 60 more BlueBird satellites in orbit in 2025 and 2026.

Things are going "according to plan" -- but that doesn't mean AST is anywhere near earning a profit just yet.

What's next in AST's plan?

Before AST can start earning profits, moreover, it must first get those satellites in orbit -- and pay for them. At an estimated cost of up to $20 million to build and launch each satellite, putting 60 BlueBirds in orbit could require as much as $1.2 billion.

Problem is, AST currently has just under $519 million in cash and equivalents on hand. Management hopes further customer prepayments will help to bridge the gap. But with no money coming in from revenue yet, investors must anticipate AST will need to sell at least some stock to come up with the $700 million or so it doesn't yet have.

How much more stock? At a $24 share price, AST might need to issue as many as 28 million new shares to raise the cash it needs, potentially diluting existing shareholders out of 14% of their ownership stake in the company.

Management hasn't announced this yet, but you should probably assume it will.

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