AST SpaceMobile Inc. (ASTS) shares took a hit in premarket trading Thursday after the space-based cellular broadband company announced it's raising a cool $1 billion through a convertible notes offering. Investors weren't thrilled with the dilution risk, sending the stock down nearly 9%.

The Deal Details

The company priced $1.0 billion in convertible senior notes due 2036 on Wednesday, offering them privately to qualified institutional buyers under Rule 144A. These notes carry a 2.250% interest rate and are set to settle on February 17, assuming all the usual closing conditions are met.

Here's the conversion math: the notes can convert at an initial price of approximately $116.30 per share of AST SpaceMobile's Class A common stock. That represents roughly a 20% premium over the stock's last reported sale price of $96.92 on the Nasdaq Global Select Market on February 11. Put another way, investors get 8.5982 shares for every $1,000 in notes they hold.

The initial purchasers also received an option to buy up to an additional $150 million in notes, exercisable through February 20.

Where the Money Goes

After deducting discounts and expenses, AST SpaceMobile expects net proceeds of about $983.7 million, or roughly $1,131.4 million if the purchasers exercise their option in full.

The company plans to deploy the cash across several strategic priorities: accelerating deployment of controlled spectrum bands globally, monetizing its proprietary technology for AI-related commercial opportunities, enhancing investment in U.S. government space opportunities, paying down higher-interest debt, and pursuing opportunistic investments.

Additional Transactions

AST SpaceMobile also announced separate registered direct offerings totaling 6,337,964 shares of Class A common stock, scheduled to settle February 20. The company simultaneously entered privately negotiated transactions to repurchase approximately $46.5 million of existing 4.25% convertible notes and $250.0 million of existing 2.375% convertible notes.

Price Action: AST SpaceMobile shares traded down 8.89% at $88.30 during premarket hours Thursday.