Due Diligence Capital Notes

Imagine a company that generated somewhere between $63 million and $71 million in revenue last year — not profit, just top-line sales — and is now trying to borrow an additional $1 billion. At 2% interest. From sophisticated institutional investors who presumably know how to read a balance sheet. The strange part is that this is not a distress scenario. AST SpaceMobile (ASTS) is not scrambling for a lifeline; it is executing a deliberate, coordinated capital-markets playbook that is fascinating to watch — and genuinely risky to own.

The company filed an 8-K with the SEC on February 11, 2026 disclosing the proposed $1.0 billion convertible note offering alongside a concurrent repurchase of older, higher-cost debt and yet another equity raise. When I read through it, my first reaction was a mixture of admiration and genuine unease. This is the kind of capital-markets move that either looks genius in hindsight or becomes a case study in a cautionary MBA course. Let me walk through exactly what is happening and why it matters for anyone trying to evaluate ASTS as a long-term holding.

The Basic Setup: What AST SpaceMobile Is Actually Building

Before getting into the financial mechanics, it helps to be clear about what the money is going toward. AST SpaceMobile is attempting to build the world's first space-based cellular broadband network — satellites in low Earth orbit that communicate directly with ordinary, unmodified smartphones. No special hardware, no dish on your roof. Your iPhone connects to a satellite the same way it connects to a cell tower.

The business model, if it works, would be transformative. Mobile network operators — AT&T, Verizon, Rakuten, and others are already signed up as partners — would pay AST to extend coverage to areas where building a physical cell tower is uneconomical. Dead zones in rural America, oceans, remote regions — the market is enormous. The problem, which the financials make painfully clear, is that the network does not yet exist at commercial scale. AST is spending aggressively to build it before a competitor does.

That context explains why the balance sheet looks the way it does. This is not a company that has lost its way operationally. It is a pre-revenue-scale infrastructure company in the middle of the most capital-intensive phase of its existence.

The Capital Stack: Layers of Debt and Equity

What a Convertible Note Actually Is

A convertible note — also called a convertible bond or CB — is a hybrid security. You lend money to the company; the company pays you a fixed interest rate; but you also hold an option to convert your loan into shares of common stock at a pre-agreed price (the conversion price) at some point in the future. For lenders, this is appealing because they get downside protection (it's still a loan with a claim on assets) plus upside participation if the stock soars. For the company, the cost of borrowing is significantly lower than a regular corporate bond, because the conversion option has real value to investors.

Why would bond investors accept a 2% interest rate when they could get 5%+ on a U.S. Treasury? Because the conversion option is the extra compensation. If ASTS's stock doubles or triples over the next decade, the right to convert into shares at today's price is worth a great deal. The investor is effectively trading yield for equity-like upside. ASTS is betting it can issue cheap debt today and let the conversion option substitute for the interest premium.

What an ATM Program Is

An ATM (At-The-Market) offering lets a company sell shares directly into the open market on any given trading day, at whatever the current market price happens to be. There is no discount, no big announcement, no underwriting road show. The company simply wakes up, decides to sell some shares, and the shares dribble into the market in real time. It is a flexible, relatively quiet way to raise equity capital without shocking investors with a surprise dilutive offering.

The Current Capital-Markets Playbook, Layer by Layer

Here is what AST's balance sheet and the February 11 filing actually reveal, broken down into its moving parts:

The proposed new $1.0 billion in 2.00% convertible senior notes due 2036. This is the headline item. ASTS wants to borrow $1 billion from qualified institutional buyers under Rule 144A (a regulatory exemption that allows sophisticated investors to trade in securities without full public registration). The 2.00% coupon is cheap for a company at this stage. The 2036 maturity gives the company a full decade to grow into its balance sheet. If the satellite network reaches commercial scale by 2029 or 2030, this debt is very manageable. If it doesn't, 2036 comes faster than it looks.
Concurrent repurchase of up to $300 million of existing older convertible notes. AST has existing 4.25% notes (with $50 million outstanding) and 2.375% notes (with $575 million outstanding), both due in 2032. The plan is to buy back up to $300 million of these with proceeds from new registered direct stock offerings — essentially swapping pricier, nearer-term debt for cheaper, longer-dated debt. The 4.25% bonds in particular look expensive relative to the new 2.00% paper, so refinancing those is clearly accretive from a cost-of-capital perspective. Accretive here means each dollar of refinancing makes the company's interest burden lighter without reducing its total firepower.
The October 2025 ATM equity program. This is already substantially deployed. As the filing states: "As of February 10, 2026, the Company has sold approximately 10.1 million shares of its Class A common stock through the October 2025 ATM Program for aggregate net proceeds of approximately $706.3 million." That is nearly three-quarters of a billion dollars raised by quietly selling shares into the market over roughly four months. About $80 million of the original $800 million ATM program remains available.
The UBS-backed term loan. In October 2025, ASTS also closed a $420 million backstop term loan through UBS. Combined with the other convertible tranches, the company's total consolidated debt as of December 31, 2025 was approximately $2,264 million — just over $2.26 billion. That is a staggering number for a company reporting $63 to $71 million in preliminary FY2025 revenue.
The cash war chest. As of December 31, 2025, ASTS held approximately $2,780 million in cash, cash equivalents, and restricted cash. This is the key number that makes the whole thing intellectually defensible. The company is not running out of money. It has more cash on hand than total debt. The question is whether that cash lasts long enough.

What the Operating Burn Actually Looks Like

The preliminary FY2025 operating expenses of $355 million to $363 million are the sobering number. Revenue of $63 to $71 million against that cost base means the company burned roughly $290 million at the operating level last year — before interest and before any debt principal repayments.

It is worth noting the non-GAAP adjusted figure here. When you strip out approximately $98 to $100 million in stock-based compensation and depreciation (non-cash expenses that don't directly drain the bank account), the adjusted operating expense figure drops to $257 to $263 million. Still dramatically higher than revenue, but closer to the actual cash burn rate on an annualized basis.

At $257 to $263 million in cash operating burn against $2,780 million in cash, the runway without any revenue growth is roughly 10 to 11 years on a pure adjusted-opex basis. But that calculation ignores debt service, capex for additional satellite launches, and the likelihood that burn rate increases before it decreases as the network scales. A more conservative estimate — incorporating all cash uses — suggests the current war chest buys perhaps 3 to 4 years of meaningful runway. That is not an eternity. It is a specific and finite window in which the commercial satellite network needs to demonstrate real revenue traction.

The company was careful to note in its 8-K filing that "The Company's financial results as of and for the fiscal year ended December 31, 2025 are not yet complete and will not be available until after the completion of the New Notes Offering and Registered Direct Offerings." In other words, these are preliminary, unaudited figures released specifically to support the capital raise — not the final audited numbers. That caveat matters.

What Could Break This Thesis

Satellite deployment delays

The entire investment case rests on commercial-scale satellite coverage arriving soon. AST has launched its first BlueBird commercial satellites, but scaling to a network capable of generating hundreds of millions in annual revenue requires many more launches across multiple years. Rocket launch failures, supply chain problems, or regulatory delays in orbital slot assignments could push the timeline out by years — years the balance sheet may not accommodate without yet another dilutive capital raise.

Leverage relative to revenue becomes untenable

$2.26 billion in debt against $63 to $71 million in revenue is a debt-to-revenue multiple of roughly 32 to 36 times. Most investors never want to see that ratio. As interest rates evolve or credit markets tighten, refinancing these convertible notes at maturity — or even earlier if covenants are tripped — could become extremely expensive or impossible on favorable terms. If the commercial network lags and the company needs to refinance in a risk-off credit environment, the cost of capital could surge.

Equity dilution erodes per-share value

The ATM program already sold 10.1 million Class A shares in four months. The new registered direct offerings will add more shares to fund the note repurchases. The $1 billion convertible note itself will eventually add more shares to the float upon conversion. Each of these layers chips away at per-share value for existing holders. If the stock price does not grow faster than the dilution, long-term shareholders fall behind on a per-share basis even if the business succeeds operationally.

Revenue ramp fails to materialize at scale

The preliminary FY2025 revenue of $63 to $71 million, while a start, is a tiny fraction of what the company needs to justify its current valuation and service its debt. Carrier partners have signed agreements, but converting those agreements into meaningful recurring revenue streams depends on network performance, coverage area, and commercial pricing. If early satellite performance disappoints or carrier uptake is slower than expected, the gap between burn rate and revenue stays uncomfortably wide for too long.

Conclusion

What AST SpaceMobile is doing is not reckless — it is high-conviction infrastructure finance. The company looked at the capital markets available to it, assessed the cost of each instrument, and built a layered structure that combines low-cost convertible debt with flexible equity raises to accumulate a cash position large enough to fund a decade-long buildout. The $2.78 billion war chest is real. The 2.00% interest rate on a billion-dollar borrow is genuinely cheap. The debt maturity profile, with the major tranches running to 2032 and now 2036, pushes the refinancing problem far enough into the future to give the commercial network time to scale.

But time is the operative word. The runway is finite, the dilution is real and ongoing, and the revenue ramp has to arrive. I am watching AST's quarterly satellite deployment updates and commercial revenue disclosures with more focus than almost any other data point in my portfolio. The moment the revenue trajectory begins to inflect meaningfully — say, toward $200 to $300 million on an annualized run-rate — the thesis compresses into something far more comfortable. Until then, this remains a bet that the capital markets stay open and that the satellites perform as designed. For a long-term investor who understands those parameters, it is a fascinating position to hold. For anyone who cannot stomach the possibility of significant further dilution or a prolonged period of operating losses, it is worth being honest about that before sizing in.