Oct 19, 20206 min read

Momentus’ $1.2bn Merger with Stable Road Capital’s SPAC

By Aman Sharma, Gustaf Baavhammar, Christopher Lewis, Richard Isbister, Peter Moravec (London Business School) and Rahul Mepani, Athean Myat, Suchritha Patlolla, Sung Cho, Kevin Hwang (Cornell University)

Overview of the deal

Acquirer: Momentus

Target: Stable Road Acquisition Corp

Total Transaction Size: $1.2 Billion, Ticker (MNTS)

Closed date: 2021

To leverage its position in the in-space transportation and infrastructure service industry, Momentus unanimously agreed to merge with Special Purpose Acquisition Company, Stable Road Acquisition, creating the first publicly traded space infrastructure company.

Due to the merger, Momentus will have approximately $310 million in cash on the balance sheet, to be funded by Stable Road’s $172.5 million of money held in trust and $175.0 million from a fully committed common stock private investment in public equity at $10.00 per share. It also includes investments from private equity growth investors and family offices. The global space economy is projected to grow from nearly an estimated $145 billion to $1.4 trillion by 2030 by driving demand for transportation and infrastructure services in space.

The new funding from the merger will fuel Momentus’s multi-pronged approach to developing space transportation capabilities, satellite as a service, and in-orbit services. The satellite market is mostly untapped and currently seeking low-cost and regular launch access to orbit. Momentus is looking to grow its customer acquisition value, and currently, its clients include satellite manufacturers, launch providers, and defense primes such as Lockheed Martin. Recently, Momentus launched service agreements with Lockheed Martin, NASA, and a partnership with Made In Space Europe (MIS EU) to develop a robotic spaceflight mission planned for 2022.

Founder and CEO Mikhail Kokorich said Momentus would use the funds for growth, operations, and support capital needs.

“We need to develop our larger vehicles at the same pace SpaceX is developing Starship and Blue Origin is developing New Glenn. With the capital we will raise from this transaction, we’ll be able to move much faster on Ardoride and Fevoride to augment the capability of those big rockets to move stuff.” - (CEO Mikhail Kokorich)

Company Details: Acquirer – Momentus Inc.

Momentus is the first commercial space company to offer in-space transportation and infrastructure services that aim to sustain human-life in space. Most notably, Momentus has developed a cost-effective in-space transportation system that relies predominantly on water propulsion technology. The company is currently investing in critical services such as in-space transportation, satellite as a service, and in-orbit services.

Founded in 2017, headquartered in Santa Clara, CA CEO: Mikhail Kokorich

Number of employees: 60+

Company Details: Stable Road Acquisition Corp

Stable Road Acquisition Corporation was founded in 2019 by SRC-NI Holdings LLC, an affiliate of Stable Road Capital. Stable Road Capital is a single-family office that focuses on value investing in credit and equities in both private and public markets. The company is active in the Cannabis industry, acting as investors and advisors for capital raises. Recent publicly announced activities include overseeing acquisitions for a US Cannabis REIT and investing in vaporisation technologies. They are the owner of the Special Purpose Acquisition Company (SPAC) ”Stable Road Acquisition Corp” created to execute this merger.

Founded in 2017, headquartered in Venice, California, USA

CEO, Chairman and Founder: Ed Freedman

CEO/CIO: Brian Kabot

Number of employees: 7

Market Cap: $231.02 M (as of 10/15/2020)

EV: $228.76 M

LTM Net Income: $107 K

P/E Ratio: 641.10 (as of 10/15/2020)

Projections and Assumptions

Short-term consequences

By going public through a merger with a SPAC, Momentus expects to have $310 million (1) cash available, mostly from several institutional investors. In addition to the extra influx of cash, the publicity gained from the announcement will likely net the company exposure to new clients. The raised capital will enable Momentus to further pursue its cutting-edge water propulsion technology that has shown promising signs of becoming the industry standard (2). By accessing cheaper manufacturing equipment, this will help the company save costs and pass those savings onto its customers, further increasing its market share. As opposed to several of its competitors, Momentus already has about $90m (3) lined up in “last-mile” delivery contracts for SpaceX, Lockheed Martin and NASA, creating sufficient cash flow in the short term to finance its operations.

The company is regarded as a first-mover in the space delivery sector and plans to use the capital raised to maintain its position and secure a significant market share by increasing future revenue capabilities through ramping up its R&D and production capabilities. Momentus’ first vehicle, Vigoride, currently transports smalls satellites but will start customer flights as early as December 2020 (4). Additionally, the company is working on their satellite as a service business model (5), bringing more modularity in space delivery to customers as well as in-orbit servicing, which will provide maintenance services on currently orbiting satellites. Launching these innovative services within a short time frame will enable Momentus to stay ahead of the growing competition in this fast-evolving industry.

“We expect to deploy the proceeds of this transaction to support our rapid growth and operations, and to support our capital needs as we ramp up revenues." Mikhail Kokorich, Momentus CEO (6)

The global space economy is expected to expand from an estimated $415 billion to $1.4 trillion by 2030, with space transportation, satellite as a service (SATAAS), and in-orbit servicing providing strong backlog and disruptive tailwinds to drive growth. Momentus is well-positioned to support this growing demand through its focus on technology portfolio development and experienced leadership team expansion while leveraging deep customer relationships across both public and private sectors. Specifically, By utilizing the approximate $310 million in cash on the balance sheet after the merger, Momentus hopes to expand their successfully tested water plasma propulsion technology capabilities in order to offer customers significantly more affordable access to space. Combined with the expansion of its service offerings, specifically with in-orbit servicing and hosted payloads, Momentus has positioned itself to capitalize on its first-mover advantage of creating the first “hub-and-spoke” model in space.

Long-term Upsides

Long-term growth opportunities for private space industrialization include in-space renewable energy, specifically with solar-thermal systems using steam turbines and generators due to its low-cost, scalability, radiation tolerance, and availability of technologies. As opposed to traditional photovoltaic solar panels, solar thermal systems are more efficient at a large-scale hundreds of kW power level. Momentus’ water plasma propulsion technology can viably contribute to this growth opportunity of building space power stations by potentially tackling the two major challenges that need to be resolved -- the cost of launching into space, and the cost of transportation within space.

Risks and Uncertainties

The global space economy expanded from $339 billion in 2016 (7) to $366 billion in 2019 (8), with projections to reach $1.4 trillion by 2030. Given this strong momentum in capital investment, it is unclear whether lasting symptoms of Covid-19 will hinder growth and if investors will remain enthusiastic in the aftermath of the pandemic. Space start-ups in Southeast Asia are already feeling the pressure of corroding support as there is hesitation to support ventures with uncertain returns (9).

While Momentus indicates an expected demand of $1.2 billion, the majority of their current signed contracts are linked to SpaceX. This means that despite currently negotiating with other private space organizations such as Blue Origin, GK Launch Services, and Relativity, much of Momentus’ current and short term future success is on SpaceX Operations. One major catalyst will be in December 2020, when a Falcon 9 Rocket Equipped with Momentus Vigoride technology will be launched. Investors will be curious to see the performance of this launch, as well as the additional SpaceX launches in June and December 2021.

Private sector space infrastructure firms are coupled to the fate of their respective public sector counterparts. SpaceX was granted $3.1 billion by NASA to help fund their recent Crew Dragon capsule. SpaceX and two other American firms Dynetics and Blue Origin secured work to join NASA to continue the lunar space race with a deadline of 2024 (10). Momentus, and the industry alike, are aware of the governmental influence in the market. Given Joe Biden is a strong favourite to win the US presidential election (11), it is unclear whether government funding for space exploration projects will remain as rampant as it has been under the Trump administration.

The space industry is rife with competition from public and private organizations across the globe. New Zealand’s Rocket Lab has completed 14 successful missions to date (12) and SpaceX boasts 93 total launches, most notably their Falcon 9 delivering humans into orbit (13). This fierce competition is an inherent risk for any company in the industry, and Momentus must make use of their $175 million cash injection to maintain and boost its competitive advantage. (14)

“Momentus is the Key to Commercializing and Industrializing [the] Space Economy” - Brian Kabot, the Chief Investment Officer of Stable Road