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I don't normally buy stocks that I consider risky. I like investing in companies that are trading at very low price/earnings ratio that I believe will continue to grow. One stock that I own that does not fit this criteria at all, however, is AST Spacemobile Inc (Ticker: ASTS). This stock is, in my opinion, a very risky investment to make for a ton of reasons that I will list, but it is also a stock that I believe could potentially have an amazing outcome. The stock is down almost 47% year to date.
First, I want to discuss why I bought ASTS in the first place. The company has a pretty impressive goal. They are trying to create a cellular broadband network for mobile phones through satellites. This will be very helpful for people in underdeveloped countries and rural areas. I really liked the mission of this company, and I still do. That is why I bought the stock. That was awhile ago though, and I have since learned a lot more about investing and valuing businesses. I'm not saying that I necessarily regret buying the stock, but I am saying that knowing what I do now about investing, I am not sure I would still have invested. I do still support the mission of ASTS, and I do not plan to sell my shares of the company anytime soon at all.
ASTS currently has a market cap of around $876 million. They're losing a ton of money right now as the technology that they are building simply costs a lot of money. Last year, ASTS did $12.4 million in revenue but lost $30.55 million. The year before, they did $5.97 million in revenue but lost $24.06 million. They're growing their revenue every year which is a good thing, but they are also losing more and more money every single year which is obviously a bad thing. Again, this is to be expected as the technology that they are trying to build is very expensive, and if they can build it and it works, I believe this company will be worth so much more than they are now. Unfortunately, that is a big if.
The reason I say that this is a big if is because they are currently spending more than they are making. When a company is spending more money than they are making, they have to continue to raise more money. While that does give the company more money to spend, it dilutes their shareholders. Let's say someone buys 1% of ASTS. They now own 1% of the company. ASTS is going to have to raise more money so they create more shares to sell to get that money and now that someone owns less than 1% of the company even though they haven't sold any of their shares. This is a worry I have with ASTS. They are going to have to dilute their shareholders, and while I do understand that, as a shareholder, I don't want my stake in the company to be diluted to nothing.
An even bigger worry I have with ASTS is that they will be unable to raise enough money. If they can't continue to raise money, they cannot continue to be in business. I believe that I am either going to make a lot of money off of this stock or the stock will go to zero because they'll be unable to raise enough money. This is why I consider this to be such a risky stock.
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