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SEC Chairman Gary Gensler. Photo: Andrew Harrer/Bloomberg via Getty Images

U.S. securities regulators aren't yet strengthening disclosure rules on SPACs, but they are beginning to step up enforcement of existing rules.

Driving the news: The Securities and Exchange Commission on Tuesday announced charges and a settlement with several entities and people involved in a 2020 SPAC deal for space cargo company Momentus.

  • That transaction, first announced in late 2020 but still not closed, was designed to bring Momentus public at a $1.1 billion enterprise value via Stable Road Acquisition, and included a $175 million PIPE. The valuation was recently slashed to $567 million.
  • The SEC accused Momentus of making misleading public statements about the results of its in-space tests and accused Stable Road of insufficient due diligence on both those tests and national security concerns involving former Momentus CEO Mikhail Kokorich (this morning the company added ex-Defense Department official John Rood as its new CEO).
  • Momentus agreed to pay $7 million in penalties while Stable Road will pay $1 million, and PIPE investors will be given permission to terminate their subscription agreements prior to the deal's shareholder approval vote.
  • Prior to the SPAC deal, Momentus had raised nearly $90 million in VC funding, and received a PPP loan.

What SEC chair Gary Gensler is saying: "The fact that Momentus lied to Stable Road does not absolve Stable Road of its failure to undertake adequate due diligence."

The big picture: This situation will fuel SPAC critics who argue that public investors are getting taken in by futuristic tech promises that are unlikely to pan out, particularly in areas like space.

  • It also offsets Saturday's successful test flight by Virgin Galactic, which went public via SPAC in 2019 (although its stock has sagged so far this week).

The bottom line: You can't spell space without SPAC, nor can you spell it without SEC.

Go deeper

Felix Salmon, author of Capital
Sep 15, 2021 - Economy & Business

Crypto faces the regulators

Illustration: Rae Cook/Axios

Fittingly for a day in which Securities and Exchange Commission chair Gary Gensler pulled no punches in his congressional testimony, the main theme running through the Blockworks crypto conference on Tuesday was undoubtedly regulation.

Why it matters: The crypto world both hates and needs regulation in equal measure.

"No-code" miracle for startups

Expand chart
Data: Interactive Advertising Bureau; Table: Axios Visuals

The U.S. has reached a tipping point in its shift from the industrial economy — one that relied on the buildout of hardware — to an information economy that relies on the transfer, storage and implementation of data, according to a new report.

Why it matters: This shift towards a data and information-based economy has allowed more businesses to establish themselves and scale quickly and at a very low cost. As such, the number of jobs created by the commercial internet has more than tripled since 2012.

Amazon's small business shield

Illustration: Aïda Amer/Axios

Amazon is touting the success of small sellers on its platform through the pandemic — and warning that antitrust legislation could jeopardize that success and blow up its open-marketplace model.

Why it matters: As online shopping became a lifeline for both businesses and consumers during the pandemic, Amazon reaped big benefits, but also saw its regulatory risk grow.