7 Days On Us, AST SpaceMobile Clears Its Orbit, Lemonade Pulls Reinsurance Back In

Taking a Look at AST SpaceMobile (ASTS), Lemonade (LMND), & Our Free Trial.

Jul 03, 2025

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In this edition, we cover two big updates from our coverage universe: AST SpaceMobile’s bold debt reduction move & Lemonade’s major reinsurance overhaul. Let’s dive in with some small abstracts.

AST SpaceMobile (ASTS): $225M Convertible Repurchase Cleans Up Balance Sheet

AST SpaceMobile (ASTS) announced a strategic repurchase of $225M of its 4.25% convertible notes due 2032, roughly half of its outstanding notes. To fund this, the company is issuing 9.45 million new shares in a direct offering to those noteholders. The net effect is remarkably shareholder-friendly: by retiring the notes, ASTS eliminates about 8.3 million potential shares that would have resulted from future conversion, essentially offsetting most of the new equity issuance. In fact, after the dust settles, the transaction results in only 1.04 million incremental shares outstanding. This move also wipes out approximately $63.8M in future interest payments the company would have owed on the debt. The rationale here is clear, clean up the balance sheet & remove a dilution overhang at a price point management deems attractive for shareholders. By cutting its debt load nearly in half & saving on interest, ASTS is strengthening its capital structure at a critical pre-revenue stage.

The implications for ASTS are pretty significant. With $225M of debt off the books, the company’s future cash burn is reduced, giving it more runway to develop its space-based cellular network. Management framed this as a vote of confidence in ASTS’s long-term plans, noting that these transactions substantially reduce obligations & position the company better for growth. It’s a signal of confidence: the company is willing to dilute slightly today (only about a 1%–2% net increase in shares) to avoid much larger dilution later & strengthen its finances. In our Intrinsic Value Tracker (IVT) model, which is inherently speculative for a pre-revenue firm, the reduced debt & interest burden actually improve the base-case valuation modestly — all else equal, less interest expense means a bit more value accrues to equity. To be sure, ASTS remains a high-risk, long-horizon story (still awaiting material revenue to come in), but this debt repurchase is a positive strategic trade-off: it lowers financial risk & removes uncertainty about future conversion dilution.

Investors have interpreted the news as a pragmatic step; it addresses balance sheet concerns even as the company continues to burn cash in development. There is a trade-off (small dilution now versus big liabilities later), but we view it as a slight de-risking. Management’s optimism about long-term cash flows seems stronger, they wouldn’t be restructuring now if they didn’t believe ASTS can eventually monetize its satellite network. Overall, cleaning up debt at this stage slightly boosts our confidence in the base-case IVT valuation & reduces one overhang for AST SpaceMobile going forward.

Lemonade (LMND): Reinsurance Overhaul Speeds Path to Profitability

Digital insurer Lemonade (LMND) is restructuring its reinsurance program, cutting its quota share cession from about 55% to just 20% effective July 1. In plain terms, LMND will now retain 80% of premiums (up from 45% before), significantly increasing the share of business it keeps on its own books. The decision comes on the back of improving fundamentals — management cited stronger diversification, underwriting, & loss ratios as key enablers. Reinsurance “comes at a cost,” as LMND’s President Shai Wininger put it, & the company’s steady improvements mean it can “retain more of the risk ourselves, improve margins, and stay capital-light”. This overhaul should have a meaningful margin impact: by ceding much less premium, they will collect far more in net earned premiums, boosting its top-line & gross profit (assuming claims experience remains favorable). Reasonably, this move is likely to accelerate their path to profitability.

The company has been narrowing its losses — Q1 2025 saw a 27% revenue jump & a GLR holding in the low 70s% — & retaining more premium means more of that improvement flows through to the bottom line. Investors appeared to agree that this is a positive step, as LMND shares rose about 5% on the announcement. By betting on its own underwriting quality (& continuing to partner with top reinsurers for the remaining 20%), LMND is effectively saying it’s confident enough in its pricing & risk management to “bet on itself.” This should improve profit margins going forward, provided that loss ratios stay on their improving trajectory.

We’ve updated our valuation accordingly. Our IVT base-case value for Lemonade was revised slightly higher after this reinsurance update, reflecting the enhanced margin capture & faster projected timeline to break-even. It’s worth noting that our previous analysis already recognized their strong long-term potential — that our previous valuation estimate was based on a decade of growth & margin expansion & vastly exceeded the stock’s then-current mid-teens trading price. Now, with more premium retained, our model attributes even more value to the company’s future earnings power.

Of course, there is a bear case to consider: skeptics argue that LMND might be taking on too much risk too soon, & if underwriting falters or a severe CAT hits, the higher net exposure could hurt. In a scenario where growth stalls or margins stagnate, the pessimists like to tout Lemonade’s value much lower (our bear-case scenario is only in the high-teens per share). We acknowledge those risks, but we disagree with the bears. Why? The data shows consistent improvement — LMND’s trailing loss ratios have improved, & excluding one-off CAT losses (like the California wildfires, which inflated Q1), the underlying loss ratio was around 59% in Q1, an impressively healthy level. In other words, Lemonade’s cortex is working, & the company has a decent reserve ($1B+ in cash) to absorb volatility. By retaining more premium now, LMND stands to reach profitability sooner without relying as heavily on reinsurers, all while maintaining a “capital-light” model. In our view, the upside from improved margins & growth leverage outweighs the incremental risk. The raise in our IVT model reflects that confidence in their trajectory toward sustainable profitability.

Closing Thoughts & New 7-Day Trial

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