SCHEDULE 13D: AT&T Converts $35 Million Convertible Note into AST SpaceMobile Equity, Securing 2.7% Stake and Board Representation

AT&T Inc. and its subsidiary AT&T Venture Investments, LLC have converted a $35 million convertible note into 6.26 million shares of AST SpaceMobile, Inc. Class A Common Stock, establishing a 2.7% beneficial ownership and securing a board seat.

Summary

• AT&T Inc. and AT&T Venture Investments, LLC (the "Reporting Persons") have filed a Schedule 13D disclosing their beneficial ownership in AST SpaceMobile, Inc. (the "Issuer").
• The Reporting Persons now beneficially own 6,260,440 shares of AST SpaceMobile's Class A Common Stock, representing approximately 2.7% of the outstanding shares.
• This ownership resulted from the conversion of a subordinated convertible note with a principal amount of $35.0 million, which AT&T Investments purchased on January 16, 2024.
• The note bore interest at 5.50% per year and had an initial conversion price of $5.75 per share.
• The Issuer delivered a notice of conversion on January 22, 2025, and the shares were issued to AT&T Investments on February 3, 2025.
• AT&T Investments also entered into a Registration Rights Agreement on January 22, 2024, granting them certain registration rights for their shares, including demand and 'piggy-back' rights.
• An Amended and Restated Stockholders' Agreement, dated June 5, 2024, outlines voting arrangements for Board elections, director nomination rights, and the agreement to vote in accordance with the Board's recommendations.
• Under the Stockholders' Agreement, AT&T Investments has the right to nominate one member to the Board (or appoint an observer), and has designated Keith Larson to serve on the Board.
• The Reporting Persons acquired the securities for investment purposes and may adjust their holdings or seek to influence management in the future.

Sentiment

Score: 7

Explanation: The sentiment is positive as a major strategic investor (AT&T) has converted its debt into equity, solidifying its commitment and taking a board seat. This indicates confidence in AST SpaceMobile's future and strengthens the partnership. The conversion was an expected event, not a surprise, and the terms of the agreements appear standard for such strategic investments.

Positives

• AT&T's conversion of its convertible note into equity demonstrates a continued strategic commitment to AST SpaceMobile, reinforcing their partnership.
• The investment provides AST SpaceMobile with capital, initially through the note, and now solidifies AT&T as a significant shareholder.
• AT&T's board representation through Keith Larson allows for direct influence on corporate activities and strategic direction, aligning interests.
• The Registration Rights Agreement provides AT&T with liquidity options for its shares, facilitating potential future sales if desired.

Risks

• AT&T Investments' right to nominate a director or observer to the Board is conditional and can be lost if they do not hold at least 80% of the Class A Common Stock underlying the Note, if AT&T Commercial Agreements are terminated (not due to AST breach), if AT&T becomes a competitor of the Issuer, if AT&T initiates legal proceedings against the Issuer or Board, or if AT&T obtains board designation rights for a competitor.
• The value of AT&T's investment is subject to the market performance of AST SpaceMobile's Class A Common Stock.
• Future actions by Reporting Persons, including potential sales of securities, could impact the Issuer's stock price.

Future Outlook

The Reporting Persons intend to review their investment in AST SpaceMobile on an ongoing basis. They may purchase additional securities or dispose of existing holdings depending on various factors, including the Issuer's business prospects, economic conditions, and market conditions. They may also engage in discussions with the Issuer's management or Board to influence strategic alternatives, including potential extraordinary corporate transactions, changes in business operations, financial matters, or governance.

Management Comments

• "The Reporting Persons acquired the securities of the Issuer for investment purposes."
• "Reporting Persons or their affiliates may purchase additional securities or dispose of securities in varying amounts and at varying times depending upon Reporting Persons' continuing assessments of pertinent factors."
• "The Reporting Persons may discuss items of mutual interest with the Issuer, which could include items in subparagraphs (a) through (j) of Item 4 of Schedule 13D."
• "AT&T Investments has designated Keith Larson to serve on the Board and, in such capacity, Mr. Larson may have influence over the corporate activities of the Issuer."

Industry Context

This filing highlights a deepening strategic partnership between a major global telecommunications provider, AT&T, and an emerging space-based cellular broadband company, AST SpaceMobile. AT&T's conversion of its convertible note into equity and its securing of a board seat underscore its commitment to AST SpaceMobile's technology, which aims to provide direct-to-cell connectivity from space. This aligns with broader industry trends of integrating satellite technology into terrestrial mobile networks to expand coverage and enhance services, particularly in underserved areas.

Comparison to Industry Standards

• The investment by AT&T, a major mobile network operator, into AST SpaceMobile, a satellite-to-cell provider, is consistent with a growing trend of telecom companies investing in or partnering with space-based communication ventures. For example, T-Mobile has partnered with SpaceX's Starlink for direct-to-cell services, and Verizon has explored similar satellite integration.
• The convertible note structure with a defined conversion price and interest rate is a standard financing mechanism for growth-stage technology companies like AST SpaceMobile, attracting strategic investors like AT&T.
• The inclusion of board nomination rights and a stockholders' agreement with voting provisions is typical for significant strategic investments, ensuring the investor has a voice in corporate governance and strategic direction, similar to arrangements seen in other telecom-satellite collaborations.

Management Changes

Corporate Governance

Related Party Transactions

• Convertible Security Investment Agreement: AT&T Investments purchased a $35.0 million subordinated convertible note from AST SpaceMobile, Inc. on January 16, 2024.
• Investor and Registration Rights Agreement: AT&T Investments entered into this agreement with AST SpaceMobile, Inc. on January 22, 2024, granting registration rights for the shares obtained from the note conversion.
• Amended and Restated Stockholders' Agreement: Entered into on June 5, 2024, between AST SpaceMobile, Inc., AT&T Investments, and other Stockholder Parties, governing voting rights and board nomination rights.

Stakeholder Impact

• **Shareholders:** The conversion of the convertible note into equity results in dilution for existing shareholders, as 6,260,440 new shares of Class A Common Stock were issued. However, it also signifies a strong commitment from a major strategic partner (AT&T), which could be viewed positively for long-term stability and strategic alignment.
• **Employees:** A strengthened partnership with AT&T could provide greater stability and resources for AST SpaceMobile, potentially benefiting employees through continued investment and growth opportunities.
• **Customers (of AST SpaceMobile):** The strategic investment and partnership with AT&T, a major telecom provider, could accelerate the deployment and adoption of AST SpaceMobile's space-based cellular broadband technology, potentially leading to enhanced services and broader coverage for end-users.
• **Customers (of AT&T):** This investment could enable AT&T to offer expanded or improved connectivity services, particularly in remote or underserved areas, leveraging AST SpaceMobile's technology.
• **Creditors:** The conversion of the note reduces AST SpaceMobile's debt obligations by $35 million, which could be viewed positively by creditors as it improves the company's balance sheet and reduces interest payment burdens.

Next Steps

• AT&T Inc. and AT&T Venture Investments, LLC will continue to review their investment in AST SpaceMobile on an ongoing basis.
• The Reporting Persons may purchase additional securities or dispose of existing holdings in the future, depending on market conditions and the Issuer's business prospects.
• AT&T may engage in discussions with AST SpaceMobile's management or Board regarding strategic alternatives, including potential mergers, asset sales, joint ventures, or changes in business operations or governance.
• Keith Larson, as AT&T Investments' designated Board member, will participate in the corporate activities of AST SpaceMobile.

Key Dates

Keywords

AST SpaceMobile, AT&T, Convertible Note, Equity Investment, Schedule 13D, Beneficial Ownership, Telecommunications, Satellite Communications, Space-based Broadband, Corporate Governance, Registration Rights, Stockholders Agreement