Why AST SpaceMobile Stock Is Plummeting This Week

What happened

Shares of AST SpaceMobile (ASTS 1.83%) are sinking this week following news that the company is selling new stock. The telecom specialist's stock was down 31.7% from last week's market close prior to the market opening today, according to data from S&P Global Market Intelligence.

AST published press releases after the market closed on June 27 announcing that it would be selling 12.5 million shares of company stock in a deal that would raise $59.4 million. In addition to diluting existing shareholders, the new stock sale was set at a price that was actually significantly below where the company was trading prior to the announcement. 

So what

AST SpaceMobile stock ended Tuesday's daily trading session priced at $6.37 per share, but shares crashed following news of the upcoming stock offering. Per the deal, the company will be selling 12.5 million shares at roughly $4.75 per share -- far below where the stock was trading before the new offering was announced. 

The stock sale is expected to close today. In addition to the agreed upon share offering, the purchaser was also given the option to purchase an additional 1.875 million shares within 30 days.

Now what

AST says it will be using the proceeds from the stock offering for purposes including payments related to launch services for its satellites and additional equipment and services costs coming up in the third quarter. While the company closed out the first quarter with roughly $185 million in cash and equivalents, the business posted a net loss of roughly $16.3 million in the period and still had big expenses from its BlueWalker 3 test satellite and its Texas facilities that needed to be paid. 

While it's not surprising that the company turned to selling new stock in order to raise funds, the sale price being substantially below where shares had been trading recently could suggest a certain amount of desperation. At the very least, it's not the kind of move that is likely to inspire confidence from shareholders, and it may take a while for the market to warm back up to AST SpaceMobile.