Stable Road Acquisition Corp.
On October 7, 2020, Stable Road Acquisition Corp. (“Stable Road” or the “Company”), a special purpose acquisition company, and Momentus, Inc. (“Momentus”), a private commercial space company, issued a joint press release announcing that Stable Road had agreed to acquire Momentus in a proposed merger, subject to shareholder approval.
On January 25, 2021, Momentus announced that its Chief Executive Officer (“CEO”), Mikhail Kokorich (“Kokorich”) had resigned as Momentus’s CEO “in an effort to expedite the resolution of U.S. government national security and foreign ownership concerns surrounding the Company.”
On this news, Stable Road’s Class A stock price fell $4.75, or 19%, over three consecutive trading days to close at $20.10 per share on January 27, 2021.
Then, on July 13, 2021, after market hours, the U.S. Securities and Exchange Commission (“SEC”) announced a settlement for penalties exceeding $8 million for charges against Stable Road, its CEO, its sponsor, and Momentus. According to the SEC, Momentus “repeatedly told investors that it had ‘successfully tested’ its propulsion technology in space when, in fact, the company’s only in-space test had failed to achieve its primary mission objectives or demonstrate the technology’s commercial viability.” Stable Road repeated these misleading claims without conducting sufficient due diligence.
On this news, Stable Road’s Class A stock price fell $1.22, or 10%, to close at $10.66 per share on July 14, 2021, thereby injuring investors further.
A securities class action has been filed against Stable Road on behalf of shareholders that purchased Stable Road shares between October 7, 2020 through July 13, 2021. This case has been filed in the U.S. District Court for the Central District of California.
The complaint filed alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors that: (1) Momentus’s 2019 test of its key technology, a water plasma thruster, had failed to meet Momentus’s own public and internal pre-launch criteria for success, and was conducted on a prototype that was not designed to generate commercially significant amounts of thrust; (2) the U.S. government had conveyed that it considered Momentus’s CEO, Kokorich, a national security threat, which jeopardized Kokorich’s continued leadership of Momentus and Momentus’s launch schedule and business prospects; (3) as a result of the foregoing, the revenue projections and business and operational plans provided to investors regarding Momentus and the commercial viability and timeline of its products were materially false and misleading and lacked a reasonable basis in fact; and (4) Stable Road had failed to conduct appropriate due diligence of Momentus and its business operations and defendants had materially misrepresented the due diligence activities being conducted by the sponsor and Stable Road executives in connection with the merger.
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