A reckoning for Spacs: Will regulators deflate the boom?
13 minutes to read
By: Miles Kruppa and Ortenca Aliaj
At the beginning of this year, the space transportation start-up Momentus thought it would be well on its way towards its stated mission of revolutionising space infrastructure and the space economy . Instead, regulators intervened. Three months after Momentus announced a US$1.2 billion ($1.6b) merger with a special purpose acquisition company, Stable Road Acquisition Corp, the Securities and Exchange Commission told the companies they were under investigation for statements made about the transaction, according to filings made public last month.
The merger, which would make Momentus one of the few publicly traded space companies, had been billed in October as a unique and compelling opportunity for investors. Momentus projected it would reach more than US$4b in revenues in 2027, including almost US$670 million in sales from a fleet of robotic vehi
INTRODUCTION
In a remarkable year for the equity markets in 2020, the increased use of Special Purpose Acquisition Companies (“SPACs”) to take companies public stands out as a defining trend. In 2020, well-known private businesses – like Virgin Galactic – became publicly-traded companies through an acquisition by a SPAC, rather than through a traditional initial public offering (“IPO”).[i] And several prominent investors – including Bill Ackman of Pershing and former White House Economic Adviser, Gary Cohn[ii] – lead SPACs currently looking for private targets to acquire. This trend shows no sign of slowing in 2021.
As SPAC creators and potential private targets continue to pursue this “going public” route, all parties involved in a SPAC acquisition – on both the SPAC and the target side – should be aware of the potential regulatory scrutiny under the federal securities and antitrust laws that will likely accompany the increasing popularity of these transact