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Why AST SpaceMobile Stock Soared, Then Fell

Posted on by angelo
Why AST SpaceMobile Stock Soared, Then Fell

AST SpaceMobile has just taken an important step towards viability. But it is not the last step yet.

Yesterday’s stock market crash hurt many stocks, but AST SpaceMobile (ASTS 6.43%) It wasn’t one of them. Defying the market rout, shares of the space startup promising satellite internet to any available cellphone worldwide rose 0.4% Monday — after reporting positive news from the FCC. AST shares looked likely to continue rising today, gaining nearly 5% in early trading.

But then AST stock gave it all back.

As of 11:55 a.m. EDT, AST stock was down 0.4% on Tuesday. In fact, it is exactly where it was at the end of last week. The questions investors are asking today are:

  • Why did the stock skyrocket in the first place?
  • Why is it going down now?
  • And what’s next for AST SpaceMobile?

Why pop?

The first answer is simple. The Federal Communications Commission (FCC) yesterday granted AST an initial license to provide communications services in the United States from five commercial BlueBird satellites. The space communications company called the decision a “significant step” toward 100 percent mobile coverage of the U.S. from space.

Why give up?

But the emphasis on “step” is important because five satellites is just the beginning. AST actually needs about 20 satellites to cover the entire United States. It eventually plans to launch 168 satellites to provide global coverage, at a cost likely close to $5 billion.

This could be a problem because AST actually only has about $210 million in the bank (and $174 million in debt). US Telecom Partners AT&T And Verizon They have pledged to contribute a few hundred million to the effort, but that still leaves a big funding hole that AST must find a way to fill.

What’s next for AST action?

In summary, AST received some good news this week. It has been granted permission to begin providing mobile phone service from space and has at least a few satellites to begin work on. Success is not assured. Investors should keep a close eye on AST’s cash reserves, as AST’s survival or demise will depend on its ability to find the funds it needs to succeed.

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