Dilution Risk - ASTS v RKLB
I've traded in and out of both of these names as momentum trades. I know Jeff is in ASTS and if I'm not mistaken has indicated that he was staying away from RKLB due to dilution risk.
Jeff - I was wondering if you might be able to expand on your thoughts on this one a bit more.
I ran the question through Claude this morning and it suggests the dilution risk is higher with ASTS. See below.
ASTS
The balance sheet looks reassuring at first — about $3.5 billion in liquidity as of March 31, 2026, after raising over $1 billion in new debt. But that cash was bought with a heavy mix of debt and equity. Shares outstanding rose roughly 24% over the past year, and the company still carries roughly $2.97 billion in long-term debt, much of it convertible — so there's a stacked dilution overhang from notes converting on top of the ATM and equity issuance. The convert structure does have offsetting capped calls in places, but the underlying problem is the burn: a $191 million quarterly net loss with ~$379 million invested in property, equipment and spectrum in a single quarter, against only $14.7M of quarterly revenue. They're funding 100+ satellites against a revenue base that doesn't meaningfully arrive until FY27. That's the classic "dilute to survive the build" profile — capital raised is consumed by capex, not growth optionality.
RKLB
Rocket Lab dilutes comparably on a percentage basis — about a 25% increase in shares outstanding over the past year — and it has an enormous facility in place: a $3.0 billion ATM common stock program registered as of May 2026, with ~579 million shares outstanding. So the capacity to dilute is large and you should expect them to keep tapping it to fund Neutron. But the quality of the dilution is different. Q1 2026 revenue was $200.3M (up from $122.6M YoY) with a net loss of only $45M, and $1.48B in cash plus a $2.22B backlog. Cash burn improved sequentially, and the $450M raised under the ATM during the quarter is what drove the cash increase. They've also reduced convertible note principal to $37.6M, so the convert overhang is nearly gone — unlike ASTS.
Net comparison
The key distinction is coverage. RKLB is diluting into a growing, contracted, increasingly high-margin Space Systems business with a narrowing loss and minimal convert overhang; the raises are funding Neutron, which is upside optionality rather than survival. ASTS is diluting (plus levering) into a pre-revenue deployment where the cash mostly disappears into capex, and the $2.97B convertible debt load means there's a second, less-visible dilution channel if those notes convert. On a risk-adjusted basis, ASTS carries the heavier dilution risk — both because the burn-to-revenue gap is so much wider and because the convert stack compounds it. RKLB's risk is more "how much of the upside gets shared with new shareholders," which is a better problem to have.