Due Diligence Capital Notes

A company generates roughly $67 million in revenue in a year while burning through more than $350 million in operating expenses. Its balance sheet carries over $2.2 billion in debt. And then it walks into the capital markets and raises another $1 billion. To most investors trained on traditional fundamentals, this looks like a distress spiral — a company papering over a broken business model with fresh debt.

But that framing misses something important. AST SpaceMobile is not a broken business. It is a business that does not yet exist at scale. The entire thesis rests on whether the company can build, launch, and commercialize a constellation of large satellites before its capital runs out — and the February 2026 convertible note offering is the clearest signal yet that institutional investors believe it can. I want to walk through exactly what ASTS is building, how it is funding the buildout, and where the real risks actually live.

What Is AST SpaceMobile Actually Doing?

The company's own description, from its 424B5 Prospectus Supplement filed with the SEC on February 11, 2026, is worth reading plainly: "We are building the first and only global Cellular Broadband network in space to be accessible directly by everyday smartphones (2G/4G-LTE/5G devices) for commercial use."

No special hardware. No satellite phone. No new device. The bet is that ASTS can beam a cellular signal directly to the same unmodified phone sitting in your pocket — using a network of large, low-Earth-orbit (LEO) satellites that are, in effect, flying cell towers.

The commercial model is a revenue-sharing arrangement with MNOs (mobile network operators — the AT&Ts, Vodafones, and Raksutens of the world). ASTS has signed partnerships with over 50 MNOs covering nearly 3 billion subscribers globally. Rather than selling phones or running its own retail service, ASTS acts as wholesale infrastructure: when a subscriber's phone roams off terrestrial coverage and onto the SpaceMobile network, the MNO pays ASTS a share of that revenue. The MNO keeps the customer relationship; ASTS supplies the signal.

This is a capital-intensive infrastructure model, not a software business. The analogy I keep coming back to is a toll road: building it costs billions and generates nothing while under construction, but once the asphalt is down, every car that uses it pays a toll. The question is whether you can finance the construction before you run out of money.

The Capital Stack: Three Moving Parts

The February 2026 fundraise is not a single transaction — it is a coordinated restructuring of how ASTS is financing its buildout. Three mechanisms are working simultaneously.

1. The $1 Billion Convertible Note Offering

A convertible senior note is a bond that pays periodic interest but also gives the holder the right to convert the principal into common stock at a predetermined price. For the issuer, this is cheaper than straight debt because the bondholder is accepting a lower interest rate in exchange for that conversion option — the possibility that if the stock price rises sharply, they can convert their bond into equity at a profit.

The new notes carry a 2.00% annual coupon (interest rate) and mature in 2036. The full offering is $1 billion, with an additional $150 million overallotment option if demand is strong enough. According to the prospectus, ASTS intends to use the proceeds for four things: accelerating spectrum deployment globally, pursuing AI monetization opportunities, expanding government space contracts, and paying down higher-interest debt already on the balance sheet.

That last use — retiring more expensive old debt — is worth paying attention to. ASTS already carries $575 million in 2.375% convertible notes due 2032 and $50 million in 4.25% convertible notes, also due 2032. Replacing higher-coupon debt with the new 2.00% notes reduces annual interest expense, which matters when you are burning cash at the rate ASTS is currently burning it.

2. The ATM Equity Program (Mostly Deployed)

Concurrent with the note offering, ASTS also ran what is called an ATM (At-The-Market) equity program — a facility that allows a company to sell newly issued shares gradually into the open market at prevailing prices, rather than announcing a large fixed-price secondary offering (which typically punishes the stock price immediately). ASTS established an $800 million ATM program and, as of February 10, 2026, had already raised approximately $706.3 million by selling roughly 10.1 million shares at an average implied price around $70 per share, leaving only about $80 million unused. With the stock trading at $96.27 on February 10, the remaining capacity had become meaningfully more valuable per share than when the program started.

3. The Ligado Spectrum Transaction

This one is less discussed but arguably more strategically important than either of the above. Spectrum is the radio frequencies over which wireless signals travel — it is a finite, licensed resource, and for a direct-to-device satellite service operating in the United States, access to the right spectrum is not optional, it is the product.

In October 2025, ASTS made a $420 million upfront payment to Ligado Networks (paid to Ligado's creditor Inmarsat) as part of a larger transaction that gives ASTS access to up to 45 MHz of lower mid-band spectrum in the US — the frequencies particularly well-suited for direct-to-device satellite connectivity. The total cash consideration for the deal is $550 million, so a further $130 million is still owed. ASTS also issued 4,714,226 penny warrants (warrants exercisable at $0.01 per share — essentially free stock) to Ligado as part of the deal's structure.

Why does lower mid-band spectrum matter specifically? Because the physics of radio propagation favor these frequencies for penetrating buildings, reaching rural terrain, and being received by standard smartphone antennas. Locking in 45 MHz of this spectrum in the US, before the commercial-scale constellation is even launched, is a meaningful competitive moat — assuming the regulatory approvals clear.

The BlueBird Constellation: From Proof of Concept to Scale

Here is where the physical infrastructure story becomes genuinely interesting.

BlueBird satellites 1 through 5 were the proof-of-concept generation — smaller, lower-capacity satellites that demonstrated the technology actually works. BlueBird 6, launched December 23, 2025, is a different animal entirely. Per the February 2026 prospectus: "BlueBird 6 features the largest commercial communications array antenna ever deployed in Low Earth Orbit. Spanning approximately 2,400 square feet, the satellite is engineered to support peak data speeds of up to 120 Mbps with plans to deliver up to ten times the bandwidth capacity of the BlueBird 1-5 series."

A 2,400-square-foot antenna in low-Earth orbit is remarkable on an engineering level — roughly the floor area of a large American house, folded up and unfolded in space at altitudes where orbital mechanics dictate precision down to centimeters. The ten-times bandwidth jump over BB 1–5 is what makes the economics work: the same launch cost (roughly $21 million to $23 million per satellite in direct materials and launch fees for Block 2) now delivers dramatically more commercial capacity per satellite.

BB6's launch in December 2025 kicked off a campaign targeting approximately 45 to 60 Block 2 BlueBird satellites launched by the end of 2026. That band of satellites is the threshold ASTS believes is sufficient for continuous coverage of the US, Europe, and Japan — the three highest-value commercial markets. Full global coverage requires approximately 90 Block 2 satellites in total.

Do the math: 90 satellites at $22 million average cost is roughly $2 billion in capital expenditure just for the hardware and launch. That is before any operating expenses, spectrum costs, or corporate overhead. This is why the convertible note offering is not optional — it is structurally necessary.

What the Income Statement Tells You (And What It Doesn't)

ASTS's 2025 preliminary financials are, by any traditional metric, ugly. Revenue came in at approximately $63 million to $71 million. Total operating expenses were approximately $355 million to $363 million. That implies an operating loss in the range of $290 million for the year.

But this framing is a category error. ASTS in 2025 is not a failing business — it is a construction project. The revenues that do exist ($63–$71 million) are early commercial services, not representative of steady-state run-rate. The operating expense base is mostly the cost of building infrastructure that has not yet reached commercial scale. The relevant question is not "why is the margin negative?" — of course the margin is negative — but "does the capital on hand get the constellation to the point where the margin turns positive before the company needs to refinance again?"

As of December 31, 2025, ASTS held approximately $2,780 million in cash and equivalents against $2,264 million in total consolidated indebtedness. The net cash position is therefore roughly $516 million before the February 2026 capital raise. Add $1 billion from the convertible notes and whatever remains of the ATM program, and the liquidity position looks substantially more durable — enough, management appears to believe, to reach the 45-to-60-satellite threshold for US and European commercial revenue generation.

What Could Break This Thesis

This is where I want to be honest rather than promotional.

The Ligado spectrum deal may not close cleanly. The transaction remains contingent on regulatory approvals that are not yet secured. Critically, Inmarsat has appealed a Delaware bankruptcy court order that would have compelled its regulatory cooperation — and that appeal is now sitting before the US District Court. ASTS has already sent $420 million out the door for this spectrum access. If the litigation derails the deal and the spectrum is not transferred, recovering that capital is not guaranteed. This is the single scenario that worries me most.
The capital requirement has no ceiling in a bad scenario. Manufacturing and launching 90+ Block 2 satellites at $21 million to $23 million each is the base case. But satellites have integration failures, launch vehicles have anomalies, and regulatory timelines slip. Any sustained delay compresses the runway. ASTS's launch agreements also carry significant termination penalties — meaning walking away from commitments is itself expensive.
The debt load is genuinely heavy relative to current revenues. $2.264 billion in total indebtedness against $63–$71 million in annual revenue is a coverage ratio that would make any traditional credit analyst uncomfortable. If commercial MNO traction is slower than the 50+ partnership agreements imply — say, because revenue-share negotiations drag or consumer adoption of the satellite roaming feature is modest — the interest obligations become a material pressure point.
Dilution is persistent and structural. Between the ATM program, three separate convertible note series (all of which can convert into Class A Common shares), 78 million-plus redeemable LLC units held by insiders, 13 million-plus incentive plan awards, and the 4.7 million Ligado penny warrants, the share count creep is significant. Every dollar raised through equity or convertible instruments adds to this pile. At some share price levels, that dilution math works in existing shareholders' favor (as it does with MSTR at a premium to NAV); at lower prices, it is simply punitive.

Conclusion

AST SpaceMobile is one of the most unusual infrastructure stories I follow. It is simultaneously a satellite company, a wireless carrier at wholesale, a spectrum holder, and a capital markets machine — raising hundreds of millions of dollars while the product is still being manufactured and launched. The financial statements will look terrible for at least another year, possibly two, because that is the correct shape of a capital-intensive infrastructure buildout at this stage.

What gives me conviction — not certainty, but conviction — is the engineering milestone BlueBird 6 represents. A 2,400-square-foot deployable antenna delivering 120 Mbps from low-Earth orbit to an unmodified smartphone is not a concept slide anymore. It is a satellite that unfolded in orbit in December 2025. The $1 billion raised in February 2026 buys the company the runway to replicate that hardware 44 to 59 more times before the end of this year, and then begin collecting revenue on the 3 billion subscribers whose carriers have already signed on. The window between "infrastructure built" and "revenue flowing" is where the entire risk sits — and it is a narrow window that the latest capital raise is working hard to keep open.