What happened
Few high-profile special purpose acquisition companies (SPACs) have had more issues getting their merger deals done than Stable Road Acquisition (SRAC +0.00%). But the SPAC in recent weeks has made steady progress toward merging with Momentus, and as a result, the stock was up 33% for the month, according to data provided by S&P Global Market Intelligence.
So what
Last October, Momentus, a space-tug service, announced plans to merge with Stable Road and join public markets. But that deal has been bogged down by regulatory concerns related to Momentus' Russian founder Mikhail Kokorich.
Image source: Getty Images.
The deal has faced heavy scrutiny by the Committee on Foreign Investment in the United States, forcing Kokorich to pledge to fully divest his ownership by March 2024. The concerns have also stalled Momentus' business. In late May, the company said its customer SpaceX has suspended work with it pending U.S. government approval. That means Momentus is unlikely to fly any missions this year.
Despite the issues, Stable Road and Momentus seemingly remain committed. And thanks to the concerns, the SPAC's shareholders are going to get a better deal. In June, the two sides announced a revised merger agreement that slices Momentus' valuation in half, meaning Stable Road holders and new investors brought in will own about 45% of the post-deal company, up from 28% in the previous agreement.
Now what
It's hard to say what to make of Momentus' business right now. On one hand, as commercial space continues to blast off, there will be more and more space junk, and with it more of a need for services like Momentus, which can get that junk out of orbit and out of the way.
On the other hand, the government scrutiny has clearly had an impact. In their statement announcing the revised deal, the companies said they now expect the combination to generate about $1.3 billion in EBITDA in 2027, down from a previous estimate of $2.5 billion.
All in, it's hard to get too excited about the Stable Road/Momentus story right now. The shares had a good June but are still off 50% from their mid-February highs. Continued caution is warranted.
