Following decades since the last astronaut set foot on the lunar surface, Intuitive Machines (US:LUNR) aims to undergird the return to the moon and reassert U.S. dominance in space exploration. On Wednesday, LUNR stock made its debut on the Nasdaq exchange under its own brand name. Further, on the Thursday session, LUNR shot up 251% against the prior day’s close.
Contrary to a traditional initial public offering (IPO), Intuitive Machines entered the public domain via a reverse merger with Inflection Point Acquisition Corp., a special purpose acquisition company (SPAC). According to Harvard Business Review, “[a] SPAC is a publicly traded corporation with a two-year life span formed with the sole purpose of effecting a merger, or ‘combination,’ with a privately held business to enable it to go public.”
Further, HBR states that “SPACs raise money largely from public-equity investors and have the potential to derisk and shorten the IPO process for their target companies, often offering them better terms than a traditional IPO would.”
Per its website, Intuitive Machines bills itself as an “end-to-end space exploration company delivering lunar access, lunar data services, extreme lunar mobility, and more.” Its stated ethos is to open access to the moon for the progress of humanity.
Industry publication Space.com wrote that “Intuitive Machines may be the first U.S. private venture to touch down on the moon. The debut mission, IM-1, will launch on a SpaceX Falcon 9 for the south pole of the moon in June or so, ahead of astronaut landings as soon as 2025 from the NASA-led Artemis program.”
Further, the publication added that “[t]he moon is rich in water ice and as such, Intuitive Machine’s Nova-C lander will serve as a pathfinder for NASA missions.” As well, the funding associated with the Nasdaq listing of LUNR stock will help build out infrastructure to support the Artemis astronauts.
Fundamentally, MIT Technology Review points out that “Artemis has many disparate purposes, serving very different groups. For some space enthusiasts, it’s simply a way back to the moon, a destination that will always loom largest in our collective consciousness. For others, it represents a path to Mars.”
As well, the Massachusetts Institute of Technology states that Artemis undergirds a political and ideological objective, “…as a way to reclaim American superiority in space, something that was most visibly lost when the space shuttle retired in 2011.”
Although politics may bolster LUNR stock, it ironically poses a considerable risk factor. Per MIT Technology Review, “[b]ut overshadowing Artemis is the uncomfortable fact that the rocket, not the moon missions it will carry, has long been the primary goal of NASA’s human spaceflight program. Where exactly that rocket is going has always been secondary—and the destination has changed multiple times.”
Further, the MIT publication warns that “[i]f something goes wrong, or if [the Artemis-carrying rocket Space Launch System] is deemed too expensive or unsustainable, there’s a chance the entire moon program will fail or at least be similarly judged. This is a wobbly, uncertain start to an effort to return humans to the lunar surface for the first time in a half-century—and could make that return, if it does happen, a very brief one.”
Notably, the space economy presented myriad troubles for early investors. For instance, Virgin Galactic (US:SPCE) gave up more than 38% of equity value on a trailing-year basis. During the same period, Rocket Lab (US:RKLB) gave up approximately 49% of market value. Even earth-imaging company Planet Labs (US:PL) dipped over 17% during the past 365 days.
For Intuitive Machines specifically, TechCrunch.com noted that while management initially forecasted a cash influx of up to $301 million due to the SPAC merger proceeds, “…shareholders opted to redeem a staggering $279.8 million prior to the transaction closing.”
In fairness, Intuitive will not be entirely without cash as it enjoys other arrangements, including $26 million in a private capital in public equity (PIPE) deal. Nevertheless, the redemptions highlight the risks associated with aspirational IPOs.
This article originally appeared on Fintel
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