Tag: due diligence
SEC charges misleading claims and inadequate due diligence in SPAC transaction
The SEC has announced charges against Stable Road Acquisition Corp. (a SPAC), SRC-NI (its sponsor), Brian Kabot (its CEO), Momentus, Inc. (the SPAC’s proposed merger target), and Mikhail Kokorich (Momentus’s founder and former CEO) for misleading claims about Momentus’s technology and about national security risks associated with Kokorich. All the parties have settled other than Kokorich, against whom the SEC has filed a separate complaint. Under the Order, the settling parties agreed to aggregate penalties of over $8 million and voluminous, specific investor protection undertakings. The SPAC sponsor also agreed to forfeit the founder’s shares that it would otherwise have received if the merger were approved. The merger vote is currently scheduled for August 2021. SEC Chair Gary Gensler weighed in—a rare comment on a litigation settlement, perhaps signaling the significance of the case: “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….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. Today’s actions will prevent the wrongdoers from benefitting at the expense of investors and help to better align the incentives of parties to a SPAC transaction with those of investors relying on truthful information to make investment decisions.”
You must be logged in to post a comment.