AST SpaceMobile is a promising company that’s looking to make giant footsteps in the field of space exploration and cellular broadband networks. AST has invested a total of $56 million in Blue Walker 3 and expects to invest an additional $10 million to $12 million.
Having ended the third quarter with $360.4 million, the company has no funds nor time to produce and launch 20 satellites in late 2022 or early 2023 as promised. AST seems to be biting off more than it can chew. Its falling shares and loss in revenue is a perfect indication of this. The launch of the BW3 has been delayed and has already been postponed from 2021 to 2022.
AST SpaceMobile Project – The Scope And The Volume
AST SpaceMobile is going into uncharted territory by making moves to build the first-ever “space” cellular broadband network. This broadband network is expected to take the best aspects from satellite communication and existing cellular service.
AST has plans to build a total of 243 low earth-orbiting satellites. These satellites will be built across a total of 16 orbital planes at an altitude of 700km above sea level. AST expects to launch the much-anticipated satellites between the years 2022 to 2023. AST is aiming to bridge 49 countries with 20 satellites.
There have been questions raised about AST licensing. These questions stem from Papua New Guinea being responsible for the procedure. The value of the satellites in the AST’s 700km orbit is expected to surpass $10 billion. How will Papua New Guinea manage such responsibility with a governmental budget of less than $6 billion? AST should be prepared to mitigate any risks and take responsibility, especially in the case of highly probable collisions.
AST’s Financial Situation
When it comes to finances and funding, AST seems to be in a precarious situation. The first six months of 2021 saw the company shareholders huge losses amounting to $31.5 million. This net loss is significantly more than the $9.9 million shareholders lost within the same period in 2020.
In the second quarter of 2021, expenses also shot sky high and doubled to an unprecedented $25.1 million. This creates questions and gives the real impression that AST is hemorrhaging money. Capital expenditures also rose to a total of $54.3 million. These losses are the first of many, and short-term forecasts are predicting more losses and cash burn.
AST is expected to incur more expenses and hemorrhage more money. This will continue until the company experiences a turnaround and begins generating significant revenue. If free cash flow continues to dwindle, AST faces the possibility of its wells running dry. As it stands, free cash flow is falling at a rate of 72.2% per year. It is also projected that AST has less than a year’s worth of cash runaway.
The company’s continued survival will largely depend on the funding it can source from the capital market. The company is expected to incur costs that range from $1.7 billion to $1.9 billion. The initial phase of the space network buildout is going to use up a whopping $300 million on its own.
Does The AST SpaceMobile Project Have Potential?
Although the AST’s goals are quite inspiring, several obstacles may render its future uncertain. The loss of revenue and the sky-high expenses are making investors uncertain about investing in this company. AST has failed to generate revenue and transform its fortunes.
This has seen its shares fall to $6.96 from $25.37 in the first quarter of 2021. The uncertainty surrounding the success of AST has also caused its shares to be more volatile. AST shares are more unpredictable than 75% of US stocks over the previous three-month period.
AST SpaceMobile has plans to launch its very first commercial satellites between the years 2022 and 2023. This is a bold move, but there have been questions raised. How will they launch satellites in such a short space of time, considering their financial constraints and the delay in the launch of the BW3?
AST SpaceMobile shows some potential, but its volatility may become the reason for its destruction. The company needs to take huge strides to assure present and would-be investors that they are not betting on the wrong horse. Hopefully, the project is not just another bubble that will leave its investors broken.
With all the delays and financial constraints AST is facing, it seems to be nothing more than a bad investment with a high probability of failing. AST needs to show investors tangible improvements to boost confidence. If they fail to show positive changes and boost investor confidence, AST is doomed to continue in its downward spiral.