Why AST SpaceMobile Stock Popped on Monday

Direct-to-cell satellite communications company AST SpaceMobile (NASDAQ: ASTS) enjoyed a modest share price boost Monday after announcing it has secured "up to 45 MHz of Premium Lower Mid-Band Spectrum in the United States" from privately held Ligado Networks.

AST stock is up 3.2% through noon ET.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

What AST said

AST currently has rights to low-band spectrum, "which offers superior penetration and coverage characteristics" for its satellites, permitting ordinary, off-the-shelf cellphones to call each other directly via its satellites -- just like specialized satellite phones.

"Adding premium lower mid-band spectrum access in the United States," says CEO Abel Avellan, "gives us long-term access to a large block of a scarce resource, significantly enhancing our planned space-based cellular broadband offering." It will permit AST to support "peak data transmission speeds up to 120 Mbps" for its U.S. telecom partners, including heavyweights such as AT&T (NYSE: T) and Verizon (NYSE: VZ).

Image source: Getty Images.

Is this good news for AST?

The additional spectrum will come at a cost. Securing "80+ years" of access to this spectrum will cost AST $550 million initially, plus payment of 4.7 million "penny warrants convertible into AST SpaceMobile Class A shares," plus annual payments of $80 million.

Assuming "penny warrants" are what they sound like, these will grant Ligado the right to purchase AST stock for one penny per share (so $47,000) one year from now. With AST shares currently costing nearly $25 apiece, this means the total transaction cost rises by another $116.4 million -- making the upfront cost closer to $666.4 million, plus the additional $80 million a year, plus the likelihood of AST shareholders suffering 2.3% stock dilution a year from now.

With closing expected in the first half of 2025, AST will need to take on additional debt to pay for this spectrum purchase. With $516 million in cash at last report and $200 million in debt, AST will soon have more debt than cash on its balance sheet.

Investors are buying AST on today's news, but I view this as a negative for the stock.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $374,613!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $46,088!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $475,143!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of January 6, 2025

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