Due Diligence Capital Notes

There is a satellite in low-Earth orbit right now that, according to AST SpaceMobile, can connect directly to the smartphone in your pocket — no special hardware, no new SIM card, no dish on your roof. If that sounds like science fiction, consider this: Verizon signed a commercial agreement with the company in October 2025 to bring exactly that service to the continental United States starting in 2026. The technology exists. The carrier partnership is inked. The question worth sitting with is whether ASTS can actually pay for the constellation of satellites it needs to make this a real business.

That answer is becoming clearer — and it involves a level of financial ambition that deserves unpacking. In October 2025, AST SpaceMobile filed an 424B5 prospectus supplement with the SEC announcing an $850 million convertible note offering alongside a concurrent equity placement. This is not a small capital raise for a startup optimizing a landing page. This is an aggressive, layered financing stack designed to fund the deployment of a satellite constellation at a pace that the commercial mobile industry has never attempted before. Let me walk through exactly what they're building, how they're paying for it, and what could go wrong.

What AST SpaceMobile Is Actually Building

Before getting into the capital structure, it helps to understand the underlying ambition, because it reframes every financial decision the company makes.

Traditional satellite internet — the kind Starlink offers — requires a specialized terminal to receive signals. The satellites are optimized to talk to dishes, not to the small antennas embedded in mass-market phones. AST SpaceMobile is building something structurally different: very large satellites with enormous antenna arrays designed to communicate directly with unmodified 4G-LTE and 5G smartphones. The company calls this the SpaceMobile Service, and they describe it in their prospectus as "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."

The commercial model sits on top of existing carrier relationships. ASTS does not sell directly to consumers — instead, carriers like Verizon white-label the service and offer it as gap coverage for rural or out-of-coverage areas. This is important because it means ASTS avoids building a consumer distribution machine; they sell wholesale capacity to carriers who already own the customer relationships. It's an elegant wedge into one of the hardest-to-reach markets in telecom.

The constellation they need to deliver this globally — roughly 90 Block 2 BlueBird (BB) satellites — is the core capital problem. At an estimated $21 million to $23 million per satellite in direct materials and launch costs, the full constellation carries a bill approaching $2 billion, before you account for operations, regulatory costs, and the significant spectrum acquisition they just completed.

The Capital Stack: Three Instruments Working in Parallel

ASTS is using three distinct financing tools simultaneously. Each serves a different investor audience and comes with different implications for existing shareholders.

1. Convertible Senior Notes ($850M principal, due 2036)

A convertible note is a bond that gives the lender the option to convert their principal into company stock at a pre-agreed price instead of receiving cash repayment at maturity. For AST SpaceMobile, the October 2025 offering priced $850 million of these notes at 2.375% annual interest, due 2032 — with an additional $150 million available via a greenshoe option (an overallotment right that lets underwriters purchase extra notes if demand is strong enough to support it). The existing $575 million in 2.375% notes outstanding already illustrates how comfortable debt markets have been with ASTS's story. Combined with $100 million in 4.25% notes (down from $460 million after prior repurchases), the total debt stack sits at approximately $724.4 million as of September 30, 2025.

The conversion price on the 2.375% notes is approximately $72.07 per share (structured as 13.875 shares per $1,000 of principal). With the stock trading at $82.81 on October 20, 2025, those notes are already modestly in the money — meaning the conversion option has real value, which is precisely why bond investors accept a 2.375% yield on a pre-profit satellite company when investment-grade corporate bonds routinely offer more. They're not just buying a bond; they're buying an embedded call option on the equity.

2. ATM Equity Program ($800M authorized)

An ATM (At-The-Market) offering lets a company sell new shares gradually into the open market at prevailing prices, rather than doing a single large dilutive block trade. ASTS authorized an $800 million ATM program in October 2025. By October 20, they had already raised approximately $277.4 million in net proceeds by selling roughly 3.2 million shares. Because the shares sell at market prices over time, the dilution is spread out, and the company can calibrate issuance to market conditions.

3. The Sound Point Credit Facility ($550M non-recourse)

The Sound Point Credit Facility is a $550 million senior-secured delayed-draw term loan sitting at the subsidiary level (AST LLC rather than the parent). "Non-recourse" means that if AST LLC defaults, lenders can only go after the subsidiary's assets — they cannot reach up to the parent company. "Delayed-draw" means ASTS can pull down funds in tranches as needed rather than taking the full $550 million upfront. This facility is specifically tied to the Ligado spectrum acquisition, and its availability is conditioned on regulatory approvals not yet obtained — a meaningful contingency I'll return to in the risk section.

The Spectrum Acquisition: Why Ligado Matters

Spectrum — the specific radio frequencies licensed to transmit wireless signals — is the invisible real estate of the mobile industry. Without access to the right frequencies, you cannot legally operate a cellular service in the United States, no matter how sophisticated your satellites are.

In June 2025, a bankruptcy court approved AST SpaceMobile's acquisition of rights to up to 45 MHz of U.S. lower mid-band spectrum from Ligado Networks, which had been operating under Chapter 11 bankruptcy protection. Lower mid-band spectrum (in the 1-6 GHz range) is particularly valuable for mobile broadband because it balances coverage range and data capacity — it's the same class of spectrum that carriers paid hundreds of billions of dollars to acquire in FCC auctions over the past decade.

The total cash consideration ASTS owes Ligado is $550 million, structured in staged payments: $420 million due October 31, 2025; $100 million due March 31, 2026; and $30 million upon final regulatory approvals. ASTS also issued 4,714,226 penny warrants — the right to buy shares at $0.01 each, subject to a 12-month lock-up — as part of the deal consideration. That's effectively a gift of equity at nearly zero cost, and it represents real future dilution to common shareholders.

The Ligado deal is significant not just because of the spectrum itself but because it removes one of the most critical regulatory barriers to scaling the U.S. service. As the prospectus states, the company intends to use the convertible note proceeds for "funding the deployment of our worldwide constellation of satellites in anticipation of adding incremental strategic markets for our SpaceMobile Service."

The Constellation Buildout: Three Stages of Coverage

ASTS is not trying to light up the entire planet simultaneously. Their deployment plan has a logical three-stage structure, which maps onto their capital requirements:

25 Block 2 BB satellites: Sufficient for noncontinuous service — think of this as coverage that follows the satellite overhead, available for minutes at a time rather than always-on.
45–60 BB satellites: Continuous coverage across the U.S., Europe, and Japan — the core commercial markets where Verizon and other carrier partnerships generate revenue.
~90 BB satellites: Full continuous coverage across all targeted global markets.

The launch campaign targeting over 60 Block 2 BB satellites during 2025–2026 represents the critical near-term execution test. With $1,220.1 million in cash and restricted cash on hand as of September 30, 2025, and the fresh convertible note proceeds, ASTS has enough runway to fund the first two phases — assuming satellite assembly, testing, and launch procurement proceed on schedule. The average cost of $21 million to $23 million per satellite, as disclosed in the 424B5 filing, implies roughly $1.3 billion to $1.5 billion for a 60-satellite constellation in direct costs alone.

Governance: One Man's Vision, One Man's Vote

There is one governance structure worth naming explicitly. CEO Abel Avellan holds 78,163,078 Class C shares, each carrying up to 10 votes per share. This gives him effective voting control over the company regardless of what public shareholders prefer. This is a founder-control structure common in tech companies — Alphabet and Meta use similar mechanisms — but it means shareholders betting on ASTS are, to a significant degree, betting on Avellan's judgment and execution. The strategy and the capital allocation decisions flow from one person. That concentrates both the upside of visionary leadership and the downside of unchecked decisions in a single individual.

What Could Break This Thesis

No capital-intensive pre-revenue space infrastructure company comes without serious failure modes. Here are the specific ones I watch.

Constellation financing gap. Getting to 90 satellites at $21–23 million each is a $1.9–2.1 billion direct-cost problem, before operational overhead. The current cash balance and the $850 million notes provide a foundation, but if capital markets tighten — if a broad risk-off environment makes convertible debt or equity issuance expensive or impossible — ASTS could find itself unable to complete the constellation. Canceling signed launch agreements is not free; there are typically penalty provisions that compound the problem.

Dilution accumulation. The layers of dilution here are real and ongoing: ATM share sales, registered direct offerings, stock compensation, 4.7 million penny warrants to Ligado, $675 million+ in convertible notes that can convert into equity at $72.07 per share, and 89.4 million LLC units held by insiders that can be redeemed for Class A shares. None of these individually are catastrophic, but together they represent a continuous compression of existing ownership that common shareholders need to price in honestly.

Ligado regulatory conditions. The $550 million Sound Point Credit Facility — and the final $30 million Ligado payment — are both conditioned on regulatory approvals that have not yet been obtained. If the relevant agencies delay or deny the necessary spectrum clearances, ASTS loses access to a significant financing tool precisely when it needs that capital most.

Satellite execution risk. Large antenna arrays in low-Earth orbit are not off-the-shelf technology. The Block 2 BB satellites are assembled and tested by a company that has never manufactured at this scale before. Launch vehicle availability, integration delays, on-orbit anomalies — these are not hypothetical concerns. The prospectus itself acknowledges that the business plan "is subject to numerous uncertainties, many of which are beyond our control."

Conclusion

What I find genuinely interesting about ASTS is that the core thesis is not speculative in the way that early-stage biotech or deep-tech companies often are. The physics works — the test satellites have demonstrated direct-to-smartphone connectivity. The carrier distribution model is already in place with a signed Verizon agreement. The spectrum access is now legally secured through the Ligado bankruptcy proceedings. The variables that remain are almost entirely financial and operational: can they manufacture and launch the constellation fast enough, and can they keep raising capital on acceptable terms while doing it?

The $850 million convertible note offering tells me that institutional debt markets are still willing to fund this story at reasonable rates. That matters. When a pre-revenue company can raise nearly a billion dollars in 10-year paper at 2.375% interest, it signals that sophisticated investors have modeled the downside and decided the asymmetry is worth accepting. Whether the stock at $82 per share adequately prices the dilution risk and execution uncertainty is a harder question — one I keep revisiting every time a new ATM filing crosses my desk. But the direction of travel is clearer now than it was a year ago, and that alone is worth paying attention to.