Momentus Stock – A Pure Play on Space Transport
Investing in a company with no revenues is like fronting some guy you don’t know 50 bones for a sack of chronic. First, you need to trust that he’ll actually return with your product. If he does return, you’re hoping it’s the skunk he promised, and not some Mexican brick weed. If he does return with sub-par product, you’re not getting your money back. In other words, you need to trust someone pretty well to give them money for something sight unseen. The same holds true for companies with no revenues today, but promises of revenues tomorrow.
To make matters even worse, we now have pre-revenue companies going public through special purpose acquisition companies (SPACs) where proper due diligence of the type found in an IPO S-1 filing document is substituted with a forward-looking glossy investor deck which is generally a copy-paste job that has the same look and feel as the rest. Today, we’re going to look at the proposed SPAC deal between space startup Momentus and Stable Road Acquisition Corp.
Stable Road Acquisition Corp
What does cannabis have to do with space? Not much, which is why we’re puzzled that Stable Road Acquisition Corp pivoted from cannabis to space. “While our efforts to identify a target business may span many industries and regions worldwide, we intend to focus our search for prospects within the cannabis industry,” said the SPAC’s S-1 filing which goes on to talk about how helpful Stable Road Capital’s prior experience in cannabis would be in finding a deal. For whatever reason, they’ve decided to have some talks with Momentus, a company that provides space transport services. The man behind Momentus is certainly one interesting character.
Momentus and Mikhail Kokorich
Before we start digging into the company, we’re going to address the elephant in the room. In a blog post, Momentus founder Mikhail Kokorich talks about his past experiences of being a successful businessman in Russia, a country we visited last year to meet with some absolutely fascinating technology startups. His experience with space ventures began in 2011 when Mr. Kokorich founded Dauria Aerospace, the first Russian private aerospace company. Three years later he left for the USA, a good decision to make, considering Dauria is now in the Moscow courts and may go bankrupt, at least according to a small Russian news site. Mr. Kokorich then joined the founding team of Astro Digital, a startup that “launched 10 satellites, four of which we tragically lost in rocket failure.”
We’re not sure what happened to Astro Digital, but we did find a court case in which Mr. Kokorich – among other persons and entities – is being accused of fraud. We presume he is innocent of those charges, but it’s a red flag that can’t be ignored. When a small scrappy company is dragged into a lawsuit that alleges criminal behavior, it tells us one of two things. Either you chose very poor third parties to affiliate with, or you’re a poor negotiator who couldn’t manage to settle a dispute, and now the courts have to, lining the pockets of attorneys along the way.
We have the utmost respect for people who immigrate to ‘Murica and build a life for themselves through hard work and grit. If it wasn’t for those people, you wouldn’t be reading this article. We’ll assume that whatever happened in the courts was cleared up, as this would have surely been uncovered during Stable Road Capital’s four-month due diligence process. So, let’s move on to talking about what Momentus has planned.
About Momentus Space Stock
Founded in 2017, San Francisco startup Momentus has taken in just over $33 million in funding to build a craft for last-mile delivery in space. When a rocket launches into space carrying a load of satellites, not all of them want to be delivered in the same location. That’s where Momentus comes into play with their Vigoride transfer vehicle which carries a payload from the rocket and delivers it where it ultimately needs to be in space. The below diagram shows how the transfer vehicle would ride on a reusable rocket like the SpaceX Falcon 9 and then deliver a customer’s satellites to the desired orbits.
The vehicle is predicated on a patented and proprietary water plasma propulsion technology, and the value proposition is the money saved when launching satellites. For example, transferring a satellite from a large rocket to its final destination in space using the satellite’s own propulsion system may cost $50,000 per kilo (that’s 2.2 pounds for you Yanks). Traveling the last mile with a Vigoride transfer vehicle can cut the cost down to $15,000 per kilo.
Customers are said to be lining up, and $90 million in fully contracted orders can be seen in their glossy investor deck with names like Lockheed Martin, NASA, and.. wait a minute… is that Astro Digital?
Does that mean Astro Digital is still alive then? Who knows, but Momentus expects their first commercial launch to take place this coming December with more to follow in 2021.
Update 10/13/2020: Astro Digital has indicated that they do not have launch services contracts with Momentus although they have worked as a supplier to Momentus.
As for revenues, those are forecasted to soar at rocket-like speeds with over $1 billion forecasted in just four years’ time.
Then the company does what we think is one of the most useless exercises possible. Momentus takes their 2024 and 2025 revenues estimates and compares them to Virgin Galactic’s 2024 and 2025 revenue estimates in an attempt to show how fairly valued they are.
Many SPACs do this, and it adds no value to compare someone else’s lofty ambitions to your own in an attempt to prove a fair valuation. Sure, there aren’t many space stocks out there, but let’s stick with real revenues as opposed to management’s expectations.
While space transportation sounds interesting enough, we’ve had about enough of this glossy investor deck, and it’s time to wash away a case of the Mondays with a glass of vino or five.
We don’t front money for drugs, and we don’t invest in pre-revenue companies unless we’re overwhelmingly convinced that we can trust the person making the promises. We’ve been overly critical about SPACs in the past for good reason, even those with revenues. In this case, you have a pre-revenue company that’s operating in a very risky space. Given everything we’ve discussed in this piece, Momentus stock will be one we avoid.
If the deal goes through in early 2021 as expected, Momentus will trade under the ticker MNTS.
Pure-play disruptive tech stocks are not only hard to find, but investing in them is risky business. That's why we created “The Nanalyze Disruptive Tech Portfolio Report,” which lists 20 disruptive tech stocks we love so much we’ve invested in them ourselves. Find out which tech stocks we love, like, and avoid in this special report, now available for all Nanalyze Premium annual subscribers.