Following a disappointing season of new listings in 2022, the new year appears auspicious for initial public offerings (IPOs), as lunar access service provider Intuitive Machines (NASDAQ:LUNR) got the party started with a blistering 160% performance earlier on Thursday. A promising venture, Intuitive Machines aligns with the burgeoning interest in space exploration and infrastructure development. At the time of writing, INTC stock trades hands at $30.50.
Electing to go the reverse merger route, Intuitive entered a business combination with special purpose acquisition company (SPAC) Inflection Point Acquisition Corp. Unlike a traditional IPO, a SPAC or blank-check firm features no underlying business of its own. Instead, its mission is to launch a new listing, then find an appropriate private enterprise with which to merge. Essentially, private companies become public through the backdoor.
However, unlike many other SPACs that appeared wildly speculative from the get-go, LUNR stock aligns with a strong fundamental canvas. Specializing in both lunar access, data services and mobility (along with orbital payloads), Intuitive represents a key component of the U.S. government’s space ambitions. According to Space.com, Intuitive may be the first U.S. private venture to touch down on the moon.
Specifically, its debut mission will launch on a SpaceX Falcon 9 for the south pole of the moon around June. This journey will occur ahead of astronaut landings as soon as 2025 as part of the NASA-led Artemis program. Per Space.com, Intuitive’s “Nova-C lander will serve as a pathfinder for NASA missions.”
Further, the debut of LUNR stock will help provide the funds necessary for Intuitive to build out infrastructure for Artemis astronauts. Thus, the forward implications bolstered demand for Intuitive shares.
LUNR Stock Compels, But Steep Challenges Lie Ahead
On the surface, LUNR stock drives incredible intrigue. As MIT Technology Review pointed out, the broader pivot to the moon doesn’t just center on the return to Earth’s natural satellite. Rather, it undergirds the ultimate ambition of a pathway to Mars.
Further driving the case for LUNR stock is competition. As MIT pointed out, China and the European Space Agency set their sights on putting astronauts on the moon. Therefore, flying robots and other equipment to the lunar surface wouldn’t be enough. Politics and national pride intertwine with science in this matter.
At the same time, MIT also noted that politics may impede the funding for lunar exploration. “But overshadowing Artemis is the uncomfortable fact that the rocket, not the moon missions it will carry, has long been the primary goal of NASA’s human spaceflight program. Where exactly that rocket is going has always been secondary — and the destination has changed multiple times.”
Further, the publication states that if lunar initiatives go awry or over budget, “there’s a chance the entire moon program will fail or at least be similarly judged. This is a wobbly, uncertain start to an effort to return humans to the lunar surface for the first time in a half-century — and could make that return, if it does happen, a very brief one.”
As well, investors may need to closely watch political dynamics in assessing the viability of LUNR stock. With presidential administrations changing every four to eight years, incoming administrations may have little reason to support prior initiatives.
Indeed, depending on what platforms candidates run on, an esoteric concept like space exploration may face budget cuts.
Why It Matters
On a cautionary note for LUNR stock, prospective investors should be aware of the steep redemptions associated with the underlying SPAC deal. Prior to the business combination, Intuitive forecasted that the enterprise may ultimately receive as much as $301 million in cash. However, SPAC shareholders opted to redeem $279.8 million prior to the transaction closing.
To be fair, Intuitive won’t be completely drained of cash due to arrangements such as private capital in public equity (PIPE) deals. Still, it’s a reminder that investors must conduct due diligence for these types of speculative ventures.
On the date of publication, Josh Enomoto 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.
