EL PASO, Texas — Investors accounting for more than half the money in a funding round concurrent with in-space transportation company Momentus’s merger with a special-purpose acquisition company (SPAC) dropped out of the deal when given the opportunity by a settlement with the Securities and Exchange Commission.

In a July 16 filing with the SEC, Stable Road Acquisition Corporation, the SPAC that is merging with Momentus, said that it complied with the terms of a settlement with the SEC announced July 13, offering investors who participated in a private investment in public equity (PIPE) funding round the ability to drop out without penalty.

When Stable Road announced the merger with Momentus in October 2020, the deal included a concurrent PIPE round, which is common in SPAC mergers to increase the amount of capital raised beyond the proceeds of the SPAC itself. In the case of the Momentus deal, $172.5 million was coming from the proceeds of Stable Road, while $175 million would come from the PIPE round.

In its July 16 SEC filing, Stable Road said investors who accounted for $118 million of the $175 million raised in the PIPE round terminated their agreements. The filing did not state which investors decided to drop out of the deal.

Stable Road said that investors who decided to stay in the PIPE altered their agreements to create a net gain of $5.3 million. Six new investors, also unidentified in the filing, joined the PIPE, adding $47.75 million to the round. That brought the total to $110 million, or a little less than two-thirds of the original PIPE round. Those investors will also receive warrants to purchase an equal amount of Momentus stock at a later date.

The SEC settlement that gave PIPE investors an opportunity to drop out resulted from allegations that Momentus made false claims about the maturity of its technology and national security issues about its Russian co-founder and former chief executive, Mikhail Kokorich, as well as the failure of Stable Road to do proper due diligence. The settlement included $7 million in penalties against Momentus and $1 million against Stable Road.

The companies are pressing ahead with the merger and are taking steps to put those national security issues behind them. Momentus announced July 14 it hired John Rood as its new chief executive, effective Aug. 1. Rood was an executive at Lockheed Martin and Raytheon who served as undersecretary of defense for policy from 2018 to 2020. Dawn Harms, who has been serving as interim chief executive since January, will return to her original position with the company as chief revenue officer.

In a company statement, Rood said that he looked forward “to leading the company in a new chapter in which we take the actions necessary to address the concerns previously expressed by the Defense Department through robust implementation of the recent National Security Agreement with the U.S. Government.” Momentus finalized that agreement in June to resolve the security issues that delayed its launches.

Momentus updated its board of directors June 16, formally adding Rood to a board that includes Brian Kabot, the chief executive of Stable Road, and Canadian former astronaut Chris Hadfield. The company also added to the board Kimberly Reed, former chair of the Ex-Im Bank; Mitch Kugler, managing partner at Haystack Strategy Partners LLC; and Linda Reiners, former vice president for corporate strategic ventures at Lockheed Martin. A seventh board member will be a “security director” approved by the Committee on Foreign Investment in the United States, a condition of the national security agreement.

Momentus and Stable Road confirmed in an amended S-4 registration statement filed with the SEC July 19 that Stable Road will hold a shareholders’ meeting Aug. 11 to vote to approve the merger with Momentus.

Jeff Foust writes about space policy, commercial space, and related topics for SpaceNews. He earned a Ph.D. in planetary sciences from the Massachusetts Institute of Technology and a bachelor’s degree with honors in geophysics and planetary science...