SEC, Gensler Lay the Hammer on Stable Road (SRAC) & Momentus

SRAC and Momentus settled on an $8M fine for misleading investors about its technology and former CEO. CBAH rises, while IVAN falls on deal announcements.
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The SEC, and new Chairman Gary Gensler, sent a strong message today in handing down an $8 million fine as part of a settlement with SPAC Stable Road Acquisition Corp (SRAC) and its target Momentus. Momentus' former CEO Mikhail Kokorich was not part of the settlement, and the SEC is continuing litigation against him. 

The SEC finds that the SPAC, its sponsor SRC-NI, and both CEOs are culpable of misleading investors ahead of their proposed business combination. As part of the findings the SEC alleges that SRAC did not conduct sufficient due diligence on the result of Momentus' in-space test and downplayed the level of national security risk posed by Kokorich.

The order finds that Momentus and Kokorich also misrepresented the extent to which national security concerns involving Kokorich undermined Momentus’s ability to secure required governmental licenses essential to its operations. In addition, the order finds that Stable Road repeated Momentus’s misleading statements in public filings associated with the proposed merger and failed its due diligence obligations to investors

Terms of the settlement include:

- $7 million fine for Momentus
- $1 million fine for Stable Road Acquisition
- $40k fine for Stable Road CEO Brian Kabot
- Forfeiture of 250,000 founder shares for SRAC sponsor SRC-NI
- Option for PIPE investors to cancel their subscriptions

This is 1) a stern warning to other SPACs that the SEC will actually come down hard on SPACs who mislead investors on financial/company projections and take an easy road out on DD, but also can 2) perhaps provide comfort to future SPAC investors that SPACs & sponsors will take more care into future due diligence processes. 

SRAC / Momentus Revisions

ICYMI last month, SRAC announced revised merger terms in which they slashed Momentus' forecasts and nearly halved the original proposed valuation of the company from $1.2B to $700M. In addition, they significantly pushed out their target flight plan from 2021 to June 2022. 

Source: SRAC Form 425 from June-30

Source: SRAC Form 425 from June-30

The market actually responded positively to the news that day (half off for Momentus?) - but the markets clearly aren't responding as positively today. SRAC was down 4.88% today and falling more in after-market trading.

Other SPAC News

  • Ivanhoe Capital (IVAN) fell 4.30% on its announced deal with SES Holdings
  • CBRE Acquisitions (CBAH) rose 1.12% on its announced deal with Altus Power

Following two votes today (both passed, LCY had no redemptions and waiting on AONE) three more votes are set for tomorrow:

Jul 14 | $ 9.08 | SBG - Sandbridge Acquisition Corporation --> OWLET BABY CARE INC.
Jul 14 | $ 10.08 | EMPW - Empower Ltd --> Holley
Jul 14 | $ 9.75 | GXGX - GX Acquisition Corp --> Celularity Inc.

Today's Price Action

Biggest Gainers

1.99% ~ $ 10.24 | AHAC - Alpha Healthcare Acquisition Corp (Announced)
1.53% ~ $ 9.95 | TIOA - Tio Tech A (Pre-Deal)
1.50% ~ $ 10.15 | DCRB - Decarbonization Plus Acquisition Corp (Announced)
1.32% ~ $ 9.98 | FTCPA - FTAC Parnassus Acquisition Corp. (Pre-Deal)
1.25% ~ $ 9.73 | ADRA - Adara Acquisition Corp. (Pre-Deal)
1.23% ~ $ 9.84 | LHAA - Lerer Hippeau Acquisition Corp (Pre-Deal)
1.23% ~ $ 11.50 | MUDS - Mudrick Capital Acquisition Corporation II (Announced)
1.12% ~ $ 9.75 | VLAT - Valor Latitude Acquisition Corp. (Pre-Deal)
1.12% ~ $ 9.96 | CBAH - CBRE Acquisition Holdings, Inc. (Announced)
1.11% ~ $ 17.35 | RICE - Rice Acquisition Corp. (Announced)
1.02% ~ $ 9.93 | FVT - Fortress Value Acquisition Corp. III (Pre-Deal)
.90% ~ $ 10.08 | TPGS - TPG Pace Solutions Corp. (Pre-Deal)
.90% ~ $ 10.08 | EMPW - Empower Ltd (Announced)
.83% ~ $ 14.62 | GHVI - Gores Holdings VI Inc (Announced)
.83% ~ $ 9.76 | DNZ - D and Z Media Acquisition Corp. (Pre-Deal)
.82% ~ $ 9.83 | NHIC - NewHold Investment Corporation (Announced)

Biggest Losers

-9.76% ~ $ 8.97 | AONE - one (Announced)
-7.17% ~ $ 12.43 | THCB - Tuscan Holdings Corp. (Announced)
-6.78% ~ $ 9.08 | SBG - Sandbridge Acquisition Corporation (Announced)
-5.43% ~ $ 10.97 | VACQ - Vector Acquisition Corp (Announced)
-4.88% ~ $ 11.88 | SRAC - Stable Road Acquisition Corp. (Announced)
-4.35% ~ $ 11.00 | FTCV - FinTech Acquisition Corp. V (Announced)
-4.32% ~ $ 9.75 | GXGX - GX Acquisition Corp (Announced)
-4.30% ~ $ 10.01 | IVAN - Ivanhoe Capital Acquisition Corp (Announced)
-3.74% ~ $ 13.88 | PSAC - Property Solutions Acquisition Corp (Announced)
-3.71% ~ $ 11.67 | TDAC - Trident Acquisitions Corp (Announced)
-3.50% ~ $ 21.08 | RSVA - Rodgers Silicon Valley Acquisition Corp (Announced)
-3.50% ~ $ 25.91 | CCIV - Churchill Capital Corp IV (Announced)
-3.45% ~ $ 12.30 | CMLF - CM Life Sciences Inc (Announced)
-3.38% ~ $ 9.71 | GIW - GigInternational1, Inc. (Pre-Deal)
-2.19% ~ $ 12.94 | FST - FAST ACQ CP (Announced)
-2.15% ~ $ 11.37 | PDAC - Peridot Acquisition Corp (Announced)
-2.12% ~ $ 13.37 | TPGY - TPG Pace Beneficial Finance Corp (Announced)
-1.79% ~ $ 9.87 | FTAA - FTAC Athena Acquisition Corp. (Pre-Deal)
-1.51% ~ $ 9.78 | NGC - Northern Genesis Acquisition Corp. III (Pre-Deal)

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report.)