Stable Road Acquisition Corp.’s shares fell more than 10% in after-hours trading Tuesday, after the Securities and Exchange Commission charged the company, its space-exploration acquisition target and executives with making misleading comments.

Stable Road

— a special-purpose acquisition company, or SPAC — agreed to merge with Momentus Inc., an early-stage space-exploration company, last fall at an enterprise value of about $1.2 billion. The SEC said in a release Tuesday that former Momentus Chief Executive Mikhail Kokorich claimed that Momentus had successfully tested its technology in space, but in fact its only in-space test had failed, and that the parties misrepresented national-security concerns about Kokorich that could preclude the company from receiving government contracts, with all of the false claims included in SEC filings.

“Momentus’s former CEO is alleged to have engaged in fraud by misrepresenting the viability of the company’s technology and his status as a national security threat, inducing shareholders to approve a merger in which he stood to obtain shares worth upwards of $200 million,” Anita Bandy, associate director of the SEC’s enforcement division, said in a release.

The SEC plans to move forward with charges against Kokorich, while the other named parties — Stable Road, its sponsor as well as CEO Brian Kabot, and Momentus — have agreed to settle the charges for collective civil penalties of more than $8 million as well as certain protections and other penalties.

See also: More money is pouring into the space industry

The SEC has been looking closer at SPACs since the funding mechanism boomed during the COVID-19 pandemic, bringing another space-exploration company, Virgin Galactic Inc.
to the public markets along with sports-gambling company DraftKings Inc.
a host of electric-vehicle companies and many more.

For more: SPACs aren’t dead, but they don’t look too healthy

“This case illustrates risks inherent to SPAC transactions, as those who stand to earn significant profits from a SPAC merger may conduct inadequate due diligence and mislead investors,” SEC Chairman Gary Gensler said in a statement. “Stable Road, a SPAC, and its merger target, Momentus, both misled the investing public. The fact that Momentus lied to Stable Road does not absolve Stable Road of its failure to undertake adequate due diligence to protect shareholders.”

The SEC filed a complaint against Kokorich in the U.S. District Court for the District of Columbia that seeks to bar him from acting as an officer or director of a public company, as well as other penalties. The complaint states that Kokorich, a Russian citizen, left the U.S. on Jan. 27, two days after resigning as CEO of Momentus, which is based in Santa Clara, Calif. The 45-year-old is currently residing in Switzerland, according to the complaint.

After closing with a 4.9% decline at $11.88 a share, Stable Road shares fell to less than $10.50 a share in the extended trading session Thursday.

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