AST SpaceMobile (ASTS) Stock Plunges on Short-Seller Report

  • AST SpaceMobile (ASTS) is Kerrisdale Capital’s latest short target.
  • The short seller just cast substantial doubt on AST’s BB1 satellite.
  • Shares of ASTS stock are up over 10% year-to-date (YTD).
Visualization of the communication network around Earth. SIDU stock
Source: Blue Planet Studio/Shutterstock

Shares of former special purpose acquisition company (SPAC) AST SpaceMobile (NASDAQ:ASTS) are trading lower by more than 10% today following the release of a short report by Kerrisdale Capital. AST seeks to build a space-based cellular broadband network that is accessible by standard mobile phones.

Last weekend, the company successfully launched its BlueWalker 3 (BW3) test satellite into space. However, Kerrisdale downplays the launch success, explaining that it is only a smaller version of the company’s final product, the Bluebird1 (BB1). The short seller notes that the launch of BB1 is two years late and will likely incur further delays. 

Let’s get into the details of the short report.

ASTS Stock Falls to Earth Following Kerrisdale Short Report

Following BW3’s successful launch, the satellite must unfurl its “64 square meter phased antenna and solar array, the largest ever commercial communications array in space.” This is a task that few companies have attempted. In fact, in the past, organizations with better funding and space engineering experience have failed at unfolding “far simpler arrays.” In addition, Kerrisdale points out that the satellite is “only a few inches thick,” which has alarmed several field experts.

The short seller remains doubtful about AST SpaceMobile’s prospects in the event of a successful unfolding, too. BB1 is expected to be eight times larger than BW3, meaning its launch will be even more difficult. Further, the delay of BB1 only gives more firepower to competitors like SpaceX. According to Kerrisdale’s proprietary checks, the “constellation will continue to see further rising costs and launch schedule delays,” something AST cannot afford.

AST claimed that the proceeds from its SPAC combination would substantially eliminate any financial risk. However, just 18 months later, the company said it did not have enough money to continue commercial operations. As a result, AST had to dilute ASTS stock shareholders by issuing more shares.

In 2020, management also forecast $1 billion of earnings before interest, taxes, deductions and amortizations (EBITDA) by 2024. However, Kerrisdale believes that AST’s EBITDA and free cash flow will be “deeply negative” in the years to come.

Kerrisdale has qualms with AST’s promoted total addressable market (TAM) of about 5 billion phones as well. The short seller notes that phone users spend most of their time on the grid. That makes it difficult to monetize unconnected users.

Unsurprisingly, Kerrisdale has disclosed that it is short shares of ASTS stock.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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