ASTS Tanked due to Misunderstood ATM Offering

TLDR: No offering this year per CEO, massive catalyst on Thursday. (launch of Block-1)

ASTS experienced a sharp 10% decline last week, with a massive midweek drop of 20% from the highs, due to a misunderstanding by the market of the future ATM offering(Next year). Here's a breakdown of what happened and why it might be an overreaction:

1. ATM Strategy Misunderstood: The market reacted negatively to the news that ASTS has set up a $400 million At-The-Market (ATM) offering. It's crucial to understand that the offering is set for next year, so the stock is safe from dilution until next year. No shares have been sold under this new arrangement yet. Historically, ASTS has utilized its ATMs very effectively, raising capital at favorable prices, which has substantially reduced the projected future shares outstanding, enhancing per-share value over time.
2. Bank Partnerships and Upcoming Coverage: The addition of Bank of America, Cantor, and Roth to this ATM is strategic. These institutions are likely to initiate research coverage, potentially around the time of the Block-1 satellite launch, which could boost investor confidence and stock valuation.
3. Firm Stance Against Public Offerings: Despite the setup of the ATM, they have clearly said in the last 2 quarter calls that there's no interest in public market offerings through at least the end of 2024.
4. An important catalyst on Thursday: The Block-1 launch is scheduled for this Thursday and is considered a major catalyst. Common shareholders have been invited to the launch. Honestly, I respect that move as I hadn't seen any other company before inviting their common share holders to a launch.
5. Potential for Definitive Agreements: With technology and funding risks mitigated, ASTS is in a position to negotiate more definitive commercial agreements that could include pre-paid revenues and investments, leading to it not needing to dilute shares, or if it needed, to do it with significantly much less shares.
6. Deutsche Bank Upgrades ASTS Price Target to $63: Deutsche Bank has significantly raised its price target from $22 to $63, maintaining a strong buy rating. This adjustment is based on key factors they mentioned including the advancements in AST's core technology, imminent commercial satellite launches, strengthening partnerships with major telecom operators like AT&T and Verizon, successful fundraising efforts, and crucial regulatory approvals. The bank's model now uses a more conservative valuation framework that accounts for the high risks associated with a pre-revenue company, setting a future enterprise value based on expected EBITDA in 2030 and adjusting for risks with a 25% cost of equity.

In conclusion, while the headline about the ATM might have spooked the market, it has definitely been misunderstood, and lead to ignoring(forgetting) the massive catalyst(launch)

Would like to hear your thoughts on the situation.

That's just my opinion, not financial advice.