What happened

AST SpaceMobile (ASTS -0.46%) is being added to two indexes, an event that will likely lead to more mutual fund buying. The news led to a 6% move higher for AST shares at the market open -- but the stock was unable to sustain those gains.

So what

AST SpaceMobile is in the early stages of an ambitious and risky plan to connect run-of-the-mill smartphones via satellites. Today, only special-purpose phones can communicate via satellites, but in theory, space-bound connections would allow better roaming in hard-to-reach areas and enable truly international service.

The company is still only in the testing phase and faces long and expensive development and deployment cycles ahead. But AST has made progress in its effort: In April, it placed its first call from one cellphone to another via a test satellite.

On Monday, after the markets closed, AST announced the stock would be added to the Russell 2000 small-cap index and the Russell 3000 market index effective June 26. About $12 trillion in assets are benchmarked against Russell's U.S. index business, and the addition means that a lot of those funds will have to buy AST shares.

"Being added to the Russell 3000 index is an important milestone for AST SpaceMobile and sign of maturity as we have now been a public company for over two years," AST CFO Sean Wallace said in a statement. "We anticipate inclusion in this index to improve liquidity and broaden exposure for our company."

Now what

Index inclusion can create new demand for a stock and often has a short-term positive impact. But it does little to change the outlook for the business.

AST has less than a year of cash in the bank, based on its burn rate in its most recent quarter. It needs to deploy 168 satellites in the months to come before its global network is complete and it can focus on generating revenue. Even if things go to plan on the deployment, there are still questions about demand for the service.

It seems likely that a secondary offering is in AST's future, and the dilution it would create would more than likely offset any benefit from the index inclusion. Investors buying into AST need to understand this is a high-risk investment and will remain so for the foreseeable future.