Why Stable Road Acquisition Shares Higher in January

What happened

Acquisition of stable routes (NASDAQ: SRAC), an ad hoc acquisition company (After-sales service), saw its shares jump 16.4% in January, according to data provided by S&P Global Market Intelligence. The market is increasingly excited about the Stable Road merger partner and is buying ahead of the deal.

So what

In October, Stable Road agreed to merge with Momentus, a private space company that intends to offer space transportation services. Think of Momentus as a towing company for space, providing services including moving satellites to their intended orbits and clearing space debris.

Image source: Momentus.

The business is speculative, but intriguing, and once the deal is done, Momentus will have public action and more than $ 300 million in cash to put its plan into action.

Much of January’s gain was likely due to speculation about the potential large owners of the stock. Cathie Wood’s Ark Invest announced its intention during the month to launch a new exchange traded fund (ETF), causing shares of Stable Road and a number of other space-related companies soar higher in anticipation that the new ETF would include them in its basket of stocks.

Now what

The Stable Road / Momentus deal is expected to close soon, removing any lingering uncertainty about the ongoing merger and bringing Momentus into public markets.

Momentus is an incredibly exciting idea, but it’s hard to overstate how speculative it is at this point. Investors looking to buy should limit companies like Momentus to a small portion of a well-diversified portfolio.

Considering the risks, this is the perfect type of stock to own in a basket with other space startups. With that in mind, there are good reasons for investors to be excited about Ark’s plan to create a space ETF, which should see stocks like Momentus join us.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Andrew Miller

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