8-K: Momentus Faces Nasdaq Delisting, Settles Shareholder Derivative Lawsuit

Momentus Inc. is facing potential delisting from the Nasdaq due to non-compliance with minimum bid price and periodic reporting requirements, while also reaching a settlement in a shareholder derivative lawsuit.

Summary

• Momentus Inc. received a delisting determination letter from Nasdaq on September 24, 2024, due to not meeting the minimum bid price requirement of $1.00 per share and failing to meet minimum stockholders equity requirements.
• The company also failed to file its Form 10-Q for the periods ending March 31, 2024, and June 30, 2024, which are additional grounds for delisting.
• Momentus intends to request a hearing before a Nasdaq Hearing Panel by October 1, 2024, to appeal the delisting and request a suspension of delisting pending its return to compliance.
• The company plans to present a plan to regain compliance, potentially including a reverse stock split, subject to board and stockholder approval.
• There is no guarantee that Momentus will regain compliance, successfully implement a reverse stock split, or that the appeal will be successful.
• A settlement was reached in a shareholder derivative litigation, with preliminary approval granted on September 16, 2024, subject to a final hearing on November 21, 2024.
• The settlement includes corporate governance reforms to be maintained for four years and a payment of $300,000 for attorneys fees and expenses.
• The derivative lawsuits alleged that Momentus engaged in a pattern of manipulation to boost its reported financial performance, made false and misleading statements, and failed to disclose key information prior to its merger with Stable Road Acquisition Company.
• The settlement also resolves claims related to the company's overpayment for acquiring Legacy Momentus and the lack of internal controls.

Sentiment

Score: 3

Explanation: The document contains significant negative news, including a delisting notice and settlement of a derivative lawsuit alleging serious misconduct. While the settlement is a positive step, the overall tone is negative due to the company's financial and regulatory challenges.

Positives

• Momentus is actively seeking to appeal the delisting decision and has requested a hearing before the Nasdaq Hearing Panel.
• The company has reached a settlement in the shareholder derivative litigation, which will resolve outstanding legal issues.
• The settlement includes corporate governance reforms that could improve the company's operations and transparency.
• The settlement of the derivative litigation includes a payment of $300,000 for attorneys fees and expenses, which is funded by the company's insurance carriers.

Negatives

• Momentus is facing potential delisting from Nasdaq due to non-compliance with listing rules.
• The company failed to meet the minimum bid price requirement and minimum stockholders equity requirements.
• The company failed to file its quarterly reports for March 31, 2024, and June 30, 2024.
• The shareholder derivative lawsuits alleged serious misconduct, including manipulation, false statements, and lack of disclosure.
• The company overpaid for acquiring Legacy Momentus and failed to maintain adequate internal controls.

Risks

• There is a risk that Momentus will not be able to regain compliance with Nasdaq listing rules and will be delisted.
• The company may not be able to successfully implement a reverse stock split if it decides to pursue one.
• The Nasdaq Hearing Panel may not grant the company's request for a suspension of delisting.
• The company's appeal of the delisting determination may not be successful.
• The company's stock price could be negatively impacted by the delisting and the negative publicity surrounding the lawsuits.
• The company may face further legal challenges or regulatory scrutiny.

Future Outlook

The company intends to request a hearing before the Nasdaq Hearing Panel and present a plan to regain compliance, potentially including a reverse stock split. There is no assurance that the company will be successful in these efforts.

Management Comments

• The Company intends to request a hearing before the Panel at which it will request a suspension of delisting pending its return to compliance.
• The Company intends to provide a plan to regain compliance to the Panel, including, subject to approval of the Companys Board of Directors and its stockholders, implementing a reverse stock split, should it be necessary.

Industry Context

The space industry is highly competitive and capital intensive, and companies like Momentus face significant challenges in achieving profitability and maintaining compliance with regulatory requirements. The delisting notice and the derivative lawsuits highlight the risks associated with early-stage space companies.

Comparison to Industry Standards

• Many space companies, especially those that went public through SPAC mergers, have faced scrutiny regarding their financial projections and operational capabilities.
• The issues faced by Momentus, such as delisting and shareholder lawsuits, are not unique in the industry, with other companies like Virgin Galactic and Astra also experiencing significant challenges.
• The settlement of the derivative litigation, while positive for resolving legal issues, also highlights the need for stronger corporate governance and internal controls, which is a common theme in the industry.
• The proposed corporate governance reforms in the settlement are similar to those implemented by other companies to improve transparency and accountability.

Corporate Governance

Legal Proceedings

• Momentus is facing a potential delisting from Nasdaq due to non-compliance with listing rules.
• The company has settled a shareholder derivative lawsuit, which alleged manipulation, false statements, and lack of disclosure prior to the merger with Stable Road Acquisition Company.
• The company also faced an action by the U.S. Securities and Exchange Commission (SEC), which was settled with penalties and undertakings.

Stakeholder Impact

• Shareholders are at risk of losing their investment if the company is delisted from Nasdaq.
• Employees may be affected by the company's financial difficulties and potential restructuring.
• Customers may be concerned about the company's ability to deliver on its contracts and commitments.
• Creditors may be at risk of not being repaid if the company's financial situation worsens.
• Suppliers may be affected by the company's financial difficulties and potential restructuring.

Next Steps

• Momentus will request a hearing before the Nasdaq Hearing Panel by October 1, 2024.
• The company will present a plan to regain compliance to the Panel, potentially including a reverse stock split.
• The final settlement hearing for the shareholder derivative litigation is scheduled for November 21, 2024.
• The company will implement corporate governance reforms as part of the settlement.

Key Dates

Keywords

delisting, Nasdaq, shareholder derivative litigation, corporate governance, reverse stock split, minimum bid price, periodic reporting, settlement, compliance, merger, internal controls