Key Points
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AST SpaceMobile rocketed higher this week after Rocket Lab announced it was acquiring Iridium in an $8 billion deal.
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The valuation premium Rocket Lab is paying to acquire Iridium has investors feeling more bullish about AST stock.
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AST SpaceMobile (NASDAQ: ASTS) stock closed out this shortened trading week with massive gains. The company’s share price gained 31.2% across the stretch. The S&P 500 gained 1.8% across the period, and the Nasdaq Composite rose 2.1%.
In addition to bullish momentum for the broader market, AST’s valuation got a huge boost from news that another player in the space industry was making a big acquisition. Rocket Lab is on track to acquire Iridium Communications in an $8 billion deal, and investors see that as a bullish sign for AST.
AST investors are loving Rocket Lab’s latest move
On June 29, Rocket Lab published a press release announcing it had entered into a deal to acquire Iridium at a valuation of roughly $8 billion. The half-cash, half-stock deal will see Rocket Lab acquire all outstanding shares of Iridium at a price of $54 per share.
Like AST, Iridium is a provider of satellite-based communications. Crucially, the deal will allow Rocket Lab to acquire Iridium’s spectrum resources and satellite-constellation infrastructure — a move that should significantly accelerate its push into the communications space. The development could be a promising indicator for AST.
What does the Iridium acquisition mean for AST stock?
At the time of the acquisition’s announcement, Rocket Lab’s $8 billion purchase price represented a 24% premium compared to Iridium’s last closing price. AST’s spectrum resources and satellite network are broadly viewed as being superior to Iridium’s, and the stock saw big valuation gains in conjunction with news that Rocket Lab was willing to pay a substantial premium to acquire a smaller player in the category. While space stocks will likely continue to see high levels of volatility in near-term trading, it’s not surprising that AST investors are seeing the Iridium acquisition as a significant bullish indicator.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AST SpaceMobile and Rocket Lab. The Motley Fool has a disclosure policy.
