It’s looking like investors in SPAC sponsor Stable Road Acquisition (NASDAQ:SRAC) are getting target Momentus for half the original price. SRAC stock is up nearly 5% in Wednesday’s pre-market trading, poised to match yesterday’s gains.
As you may recall, Stable Road is just one of the latest blank-check firms to hitch its fortunes on a space company.
In this case, it’s Momentus, a space cargo firm with a business model built on the expected need for supply deliveries to the stratosphere at some point.
In a filing with the Securities and Exchange Commission (SEC) yesterday, the SPAC reduced the enterprise valuation of Momentus from $1.13 billion to $566.6 million. The firm also pushed the outside date to complete the transaction from June 7 to Aug. 13. It also said that a contemplated repurchase agreement with one of its investors, Prime Movers Lab Fund I, had been terminated.
SRAC Stock Untouched By Earlier SEC Issues
Earlier this month, Stable Road said that it had received a deficiency letter from Nasdaq relating to the company’s failure to timely file its Form 10-Q for the quarter ended March 31, 2021. The company had explained that failure as resulting from the delay in the wake of the SEC’s April 12 guidance on accounting and reporting for SPAC-issued warrants. SRAC stock didn’t miss a beat on that announcement.
A warrant allows its holder to buy or sell shares of a company from/to the company at a specific price at a specific time. SPAC stocks warrants offer more leverage to the investor in the underlying SPAC stocks. And since they are in-the-money, with real intrinsic value attributable to the warrants, they offer a relatively safe investment, according to InvestorPlace contributor Mark R. Hake.
The April guidance called for SPACs to classify warrants as liabilities instead of equity instruments. As InvestorPlace Markets Analyst Joanna Makris wrote last month, SPACs typically issue detachable warrants to early stage investors. Those who choose to redeem their shares can keep the warrants and sell them at a later date. SPACs have started to warn investors that due to new SEC guidance, their previously audited financial statements should no longer be relied upon.
She noted that more SPAC combinations are having trouble getting to the finish line, as some can’t get shareholder votes or arrive at deal terms with their targets.
For Stable Road and Momentus, the finish line’s been pushed out but it’ll cost them less to get there, so it seems.
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, including previous stints with Bloomberg News and as a buyside equity research editor. His Substack newsletter, TLV Strategist, covers the Israel business scene.