AST SpaceMobile (ASTS 4.60%) stock jumped 6.8% through 11 a.m. ET Tuesday, and for a most surprising reason.
The cellphones-to-satellites-to-cellphones communications company filed a Form S-3 with the Securities and Exchange Commission (SEC) this morning, advising that one of its shareholders intends "from time to time" to sell up to 10.4 million shares of AST.
NASDAQ: ASTS
Key Data Points
Is bad news suddenly good news?
Selling AST stock now makes a lot of sense. Thanks in part to two analyst price target hikes (valuing AST stock as high as $13 a share) over the past two weeks, as well as two big contract announcements signed with AT&T and Verizon Communications, shares of AST stock have shot up nearly 80% since late May.
An 80% gain is a big motivation to sell out of AST stock, and it seems this is exactly what one shareholder is doing: taking profits and exiting the stock before those profits evaporate. But what about the investors who are buying AST stock this morning?
I have to think these investors are making a big mistake.
Is AST SpaceMobile stock a buy?
As I explained earlier this month, AST's biggest problem right now is that while it has customers in hand and a technology that works, what it doesn't currently have is enough cash to build all the satellites it needs to operate this business at scale, and eventually earn a profit. To raise that cash, I hypothesized, AST might want to sell a lot of shares -- and immediately after an 80% run-up in stock price would be a great time to sell.
Problem is, if you read the S-3 filing, none of the shares being sold in this stock offering actually belong to AST. AST will "bear all costs, expenses and fees in connection with the registration of the shares of Class A Common Stock." But it "will not receive any proceeds from the resale of the shares of Class A Common Stock by the Selling Stockholder."
Long story short, AST still has a cash problem. This share sale won't solve it.
