Rocket Pocket 🚀

$$$ BREAKING NEWS: JRP Futures, a leading provider in the Retail Time Travel Services market, is pleased to announce that it has recently successfully* tested its breakthrough 2-person, rapid-transit Cronus Capsule on the AD2021-3031 time corridor.

The following exciting INVESTMENT OPPORTUNITY now arises: subject to approval by the Board and Management, you will be permitted to invest in the success of our forthcoming Apocalypse project, through the purchase of Class B Units issued by our Bermuda-incorporated Revelations Special Purpose Investment Vehicle, in an amount having an aggregate value of $100,000,000 (based on a price per unit equal to the fair market value, as determined by the Board). Terms and conditions apply. $$$

*Nothing herein is intended to convey the impression that any particular outcome was achieved in the test phase of the Cronus Capsule design project.

Wowser! Is your finger itching to press send on that bank transfer instruction? I hope so. If it is, I have another opportunity you may be interested in. Last week, the SEC introduced us to Momentus Inc, a "space transportation company". Momentus filed an S-4 merger registration statement recently claiming that it had “successfully tested” a “microwave electro-thermal (‘MET’) water plasma thruster" which was "designed to move a satellite into custom orbit after launch.”

How exciting!!! Shades of Buck Rogers meets the Legion of Doom. I'm sure investors were chomping at the bit. That's why I want you to run away with me and experience something new. 🎵 Anything you've already done just won't do. 🎵*

Just one small problem:

in fact, the company’s only in-space test had failed to achieve its primary mission objectives or demonstrate the technology’s commercial viability

Gee, you mean...the CEO allegedly:

engaged in fraud by misrepresenting the viability of the company’s technology...inducing shareholders to approve a merger in which he stood to obtain shares worth upwards of $200 million

??

Aw shucks. I was quite attached to the idea of that re-orbitational microwave electro-thermal water plasma thruster myself.

But wait. There's more:

[Momentus] also misrepresented the extent to which national security concerns involving [its CEO] undermined Momentus’s ability to secure required governmental licenses essential to its operations.

Oh dear. That sounds bad, doesn't it? Folks, don't try this at home.

The background to this mildly surreal space débacle is the current popularity of SPACs as a means of curtailing the pre-IPO timeline for an investee company. (A SPAC is a company with no commercial operations that is formed strictly for the purpose of raising capital through an initial public offering (IPO) in order to acquire an existing company identified only after the IPO is completed.) SPACs have had a mixed history--as I wrote here--but it's by no means all bad. In fact, there's a positive precedent in the "space transportation" category: Virgin Galactic went public in 2019 via a SPAC merger with Social Capital Hedosophia. Still, I don't know about you but I tend to give an investment category the side-eye whenever I detect a manifest over-reliance on the word "ecosystem" in the stan literature:

Some suggest there was a strong theme of "corners cut" and "froth" in the run that SPACs had earlier this year. (February set a monthly record with a record $117bn of SPAC mergers and $35.3bn of IPOs.) Right or wrong, in April the SEC warned the public about the dangers of SPACs noting that:

any material misstatement in or omission from an effective Securities Act registration statement as part of a de-SPAC business combination is subject to Securities Act Section 11. Equally clear is that any material misstatement or omission in connection with a proxy solicitation is subject to liability under Exchange Act Section 14(a) and Rule 14a-9

Yeah, call it their extraordinary powers of psychic intuition but the SEC were wondering whether a reduction in the pre-IPO timeline might somehow translate in the minds of some sponsors into a reduction in securities law liability exposure. And, then...quelle surprise! Turns out it probably does (translate, I mean). Well I never.

In this case, Momentus was the target acquisition. The sponsor was the snappily-named SRC-NI and the SPAC in question was Stable Road Acquisition Company (SRAC). Charges were brought against all three and also against SRC-NI's CEO Brian Kabot under, inter alia, Section 17(a) of the Securities Act (use of interstate commerce for purpose of fraud or deceit). Charges under Exchange Act Section 14(a) and Rule 14a-9 were also brought against SRAC and Kabot.

So far, so depressingly predictable. Turns out the most alluring part of this story, by far, is the seductive charm of the re-orbitational microwave electro-thermal water plasma thruster. But, as it happens, we can yet hope for bigger and better because the SEC has “ramped up” its SPAC inquiries, and will be focusing in future on “potential conflicts of interest created when banks act as underwriters and advisers on the same deal.” Now, I'm no antagonist when it comes to banks and, even at my most hostile, I'd still admit that banks do good things (liquidity and credit) most of the time, but I'm a big fan of addressing conflicts of interest. Like cigarette smoking in restaurants and (I'm guessing) sex doll hotels, unregulated financial conflicts of interest tend, with the benefit of post-regulation hindsight, to leave everyone shaking their head and sighing "what were we thinking?"

...just like investors who've been left holding the re-orbitational microwave electro-thermal water plasma thruster, in fact.

**Credit: Matthew Kahane / Fraser Smith / Thomas Calloway. I Want You lyrics © Touchyfeely Music, God Given Music, Chrysalis Music Ltd, Bruce Welch Music Ltd