From $5.4 billion to $11 million in three years. To the moon, dude!
By Wolf Richter for WOLF STREET.
SPAC humor is now everywhere in our pantheon of Imploded Stocks. Astra Space, which had gone public via merger with a SPAC in July 2021 and had launched five rockets as a public company, three of which failed, and whose “mission is to improve life on Earth from space by creating a healthier and more connected planet” or whatever, as it says, announced today that it has agreed to be bought out by Astra’s co-founder, CEO, and chairman, Chris Kemp, and Astra’s co-founder, CTO, and director Adam London, for $0.50 per 1-for-15-reverse-stock-split-adjusted share, or 3.3 cents per original share, at a valuation of $11.3 million, down from $5.4 billion in February 2021 after the SPAC merger was announced.
As part of the historic boom in these huge reverse stocks splits, Astra Space had reverse-split its shares in September 2023 where 15 shares were reduced to just one share, to get the share price to jump 15-fold to keep it from getting delisted for a while even as the shares continued to collapse. The reverse split gave them ample room to collapse into without having to deal with fractional pennies.
Upon the announcement today of the company’s acceptance of the $0.50 per share buyout offer, Astra’s shares [ASTR] plunged 32% from $0.86 to $0.58 a share. They’re down 99.8% from the reverse-stock-split adjusted peak of $337 a share on February 18, 2021, after the SPAC merger was announced but before it was completed. Obviously, today’s 32% plunge doesn’t even register on the chart:
The chart documents consensual hallucination, as we have come to call the phenomenon where stock jockeys drive up stock prices of whatever company to whatever level, and it works great for everyone until the stuff begins to kathoomph.
In the less than three years as a public company, with quarterly filings through September 2023, the company has lost $760 million. It was very good at hosing cash down the drain, that’s for sure.
In November 2023, as part of the SPAC humor, Kemp and London had proposed to buy the company at $1.50 a share (10 cents a share before the reverse stock split).
But on February 24, 2024, the executives cut their offer to $0.50 a share, citing four reasons, including the urgency to get this done as “an alternative to imminent bankruptcy.” I mean, who’s going to argue with them?
But we’re not amused, said the stock jockeys that hadn’t gotten out in time. Or maybe they were amused. Maybe, it’s just one big video game. SPACs, meme stocks, cryptos, Nvidia, I mean, look, we’re all just having fun.
Kemp and London cited:
- “the continued cash burn resulting from delay in reaching an agreement”
- “higher non-operating expenses related to the Company’s use of multiple third party advisors to address the Company’s liquidity needs and assess options outside of this proposed transaction”
- “Special Committee, customer and investor requirements for sufficient cash to be on the Company’s balance sheet at closing of a transaction to support go forward operations”
- “the urgent need for the Company to identify a sustainable solution satisfactory to the Special Committee as an alternative to imminent bankruptcy, transposed with the amount of investor capital that we have identified to date in support of this transaction.
And they said in their letter at the time:
“We believe that taking the Company private and delivering some equity value to shareholders is a superior alternative to taking the Company through a liquidation or reorganization process that would likely impair the Company commercially and result in zero proceeds to shareholders.”
Which is probably true. Zero is never great for a stock, though lots of SPACs have already gone there.
It was this offer, disclosed on February 24, that Astra announced today it had accepted – that it has entered into a definitive merger agreement with the acquiring entity, formed by Kemp and London, at $0.50 a share.
Among the other space SPAC are Virgin Orbit Holdings, which filed for bankruptcy in April 2023, 15 months after the SPAC merger, and was liquidated; and Virgin Galactic, which lost $1.63 billion over the past four years, in ever larger annual losses, on just $12 million in combined revenues over those four years, but whose shares are still twitching out there at $1.72, down by 97.3% from the peak in February 2021. To the moon, dude!
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When purchasing stock in a startup, make sure the certificates are printed on 2-ply, pleasantly scented paper.
Hahaha. A little humor on an ugly situation.
Haha yup. Got in on a fund raise for a small startup I knew closely and briefly believed in. My $5,000 investment is now worth like $20 after continued dilution. Not public. They are still not close to profitability. Lesson learned.
Whatever you do, don’t believe in private equity LPs from our friends in Wall Street. I’m at about 3c on the $ from stuff 8 years ago that was supposed to go private in 2 years. Worst thing is I can’t get out, and so can’t recognize the capital loss. Live and learn.
isn’t that what the vultures are for
I don’t think the lesson is learned. The lesson for such early-stage startups is that most of the time, you’ll lose all your money. So you make many small bets. $5,000 is smaller than most would accept.
Is anyone surprised?
How much of the private equity thrown at SPACS was QE/ZIRP inspired “money for nothin chicks for free” leveraging – with limited real underlying value?
The whole house of cards is enterring a highly vulnerable stage (well beyond SPACS) as the credit cycle nears its inevitable end, the global economy slows and a lotta pissed off foreign countries logically follow risk reduction following the unilateral US seizure (confiscation) of assets, SWIFT weaponizing and sanctions.
The global monetary system is changing; the dollar is under assault. It’s a war that will take a while to sort out. But it has started.
“make sure the certificates are printed on 2-ply, pleasantly scented paper.”
May I also suggest perforated and absorbent as well…..
This is just hilarious that wallstreet gets away with this type of nonsense. These are the legal schemes that through the proper SPAC can sell anything to anyone . Crypto to the moon riding in one of these rockets these folks will build . Rising from the ashes . Maybe their business plan is to take the cash on hand if any and buy crypto for moon and mars crypto mining . Technical question can crypto be mined on the moon?
Crypto makes SPACs look sane.
Exactly. SPACS at least have a business model. The 67000 dollar a coin crypto is making a real mockery of our financial system, and the Fed is okay with it.
They chose to reward speculators and degenerate gamblers at the expense of society as a whole. The entire system is a rigged sham.
What I have found, sadly, is people don’t even understand what they’re voting for anymore and routinely vote against their own interests, unwittingly.
If you could show young people that they would be much, much poorer and have a much more difficult time ever affording shelter if they voted for a liberal, they might re-think it.
This is not to say that RINOs are any better. The system has been hijacked by globalist billionaires who have funded the politicians’ campaigns and paid them off.
Agree with Einhal. The world is in such a messed-up state that only a crash could restore some of the justice. Even though the poor will end up being hurt too, a crash would hit the asset holder much harder. At the very minimum, a significant market correction of 50% or more is needed to remove the speculation and froth from the system.
Not as long as the gov’t is fabricating jobs, deficit spending like there is no tomorrow, huge pension and hedge funds need to borrow to maintain rate-of-return, etc., etc.
I just don’t see how any of this is sustainable once the petrodollar comes under real pressure.
Unfortunately I can’t afford to vote anything other than blue, I’m not white and I’m one of those pronoun havers everyone hates. If there was a party that had a realistic chance of winning that didn’t waste time with this culture wars nonsense, had reasonable foreign policy, and sane economic policy I’d dump the dems for them in a heartbeat.
But that’ll never happen, so I’m stuck, as much as I despise their deficit spending (and on the wrong things!) and general incompetence. I’ve given up.
Unintentional irony is by far the best form of humor.
DC, you are one funny guy.
Depth Charge,
Where exactly did you find THAT….sadly?
Was it in the lining of that red hat you have, or in the old family Bible?
Sorry, you went outside your creative Fed invective borders.
I have these really wonderful Tulip bulbs. You can’t get them anywhere else.
You forgot to add “AI tulip bulbs” to the ad.
Any one have any thoughts on Clover Health spac (CLOV)? .87 cents now. I’m sure this will make Wolf’s imploded list if it hasn’t already.
Not worth your time. I recommend you pass on this investment.
Hi Wolf,
Fantastic website! Your website should be a mandatory read in high school. And an absolute minimum for anyone claiming an MBA to a PhD in Finance.
Unfortunately SPACE has been a realm of fraudsters, fools, and the incredibly ignorant for decades. The field is highly technical, where reality trumps hope and dreams. I am surprised that someone is not selling a SPAC owning a goat farm on the far side of the moon.
Many of the systems promoted to the public actually have very little support from market needs and other data. The ground and space systems necessary to deliver a SPACE service are both complex and expensive relative to the actual possible revenues.
It is HOPE vs REALITY, of which 10,000% meets 1%.
The profit margins on Iridium, Globalstar, Assure Sat, and other misadventures have rocketed from 200% to a minus 99%.
Story of “reality and needs” meets “what the hell revenues can actually be collected.”
…if wanting to invest in rockets, methinks the historic, long-term popularity of the fireworks-type (a Chinese gift to human jollity) might be a better bet (one can EXPECT the product to explode into ashes, with customers still happy to repurchase…).
may we all find a better day.
These situations aren’t something to make fun of. I invested my life savings in this company in my most desperate time and I’m now ruined. I desperately try to find information that will indicate it will go back up or I get at least get out even but that doesn’t look likely. All of these shenanigans have a human toll that no one seems to grasp.
Look, you were an eager player in consensual hallucination. You bought the stock because you put your brain to sleep and hoped to get rich quick. We have all done this. But no one should ever do it. Crypto is the same way. Lots of “investments” are. Not all of them have crashed yet.
“Caveat emptor” is a time worn adage, although “cave canem” seems more appropriate for SPACs.
However, “there oughta be a law” is a fine old American phrase. Is it true?
Do people really reject any and all regulation? I mean, when I drive my car, I don’t find government regulation such as stop signs, traffic lights, speed limits, etc. to be that ornery or restrictive to my individual liberty. Am I a nut to think that?
Steve M – my long-term observation is that ‘Muricans LOVE making laws. Strictly enforcing while thoughtfully reviewing/modifying them, ‘sunsetting’ the obsolete ones? Not so much. (cognitive dissonance creeps ever forward…).
(As to ‘feeling like a nut’, imho, i credit much of that to our long-conducted, still-unsettled, popular war of conceptual semantics concerning ‘liberty and it’s responsibilities’ vs. ‘the unfettered freedom of universal license’ vs. ‘laws for thee, but not for me’…). Best-
may we all find a better day.
People still obey traffic laws?
They’re no longer considered traffic laws. They are now classified as “traffic advisories”.
Uniform law/regs enforcement is supremacist behavior. In our new tribal/post-modernist world there are no universal semantics. Get with the program already!
pj – oh. As to ‘getting with the program’, why should I? 😉
may we all find a better day.
However, “there oughta be a law”
there is a law:
SEC was set up by FDR during the depression to prevent just what happened today; namely fraudulent income and balance sheets and the touting of bum stocks and bonds, whether by brokers, security analysts or investment advisers. In fact, the SEC registers brokers and investment advisers, but what good is this? All that the SEC really does is to go after those allegedly breaking the securities laws, and that is after the fact.
No one on this site seems to be quoting Warren Buffett and Charlie Munger on the subject of investing and the follies of humans. their writings are classic and invaluable to those wanting to accumulate wealth. Worth a person’s time for sure. I owe everything I have to those guys.
Buffet is famous for saying not to invest in anything you don’t understand. Lately, I don’t understand anything about the public securities markets, so I’m in money markets until some sanity comes back into play.
Pure wisdom dispensed daily.
1: Pay for the US government for 1 1/2 months.
2: Assuming 760 Million was actually meant, pay for the US government for 1 1/2 hours.
3: If 760 Million is true, give everyone in the world 10 cents.
4: Or if 760 Billion is true, give everyone in the world 100 bucks.
It’s not really that much …
I’m sorry for your loss, a very painful lesson. Never go all-in on anything. Learn from this pain and share with others. Diversify.
as I said…..
“Thoughts and prayers”?
You’ve got to be kidding. This can’t be a real comment but an attempt to generate some sympathy comment strings.
In his comment he said he made the investment in a moment of desperation. I’m sure it happens all the time.
Frankly I don’t believe this. Can you walk through your research/decision/execution process? Might be useful for others to not make the same set of mistakes.
You aren’t ruined, you learned an expensive but valuable lesson. Going forward, you can work hard, avoid debt, and rebuild your savings, knowing the truth about wall street and being free of them, and you can be a warner who saves others who will listen. Ancient wisdom, freely available, says avoid get rich quick schemes, you’ll be lucky to get out with the shirt on your back.
On second reading, I think Jerry mathers was pulling our leg.
“and rebuild your savings,”
———————————–
and what value have savings in the face of our FED?
I love the catch-all term ‘cash burn’.
The money didn’t just become smoke particles…it went into various bank accounts and was poorly allocated on myriad goods/services.
It caused a bright, transitory and inflationary flame into outer space.
Several founders have run high-fliers into the ground and want to buy them back at the resulting deep discount. Rinse and repeat, I guess? A new generation of punters seems to show up every 3 years or so nowadays.
Elsewhere, one interesting SPAC at the moment with weird (celebrity) dynamics is DWAC.
This stuff is downright comical. I’d love to see a list of investors that lost their shirt on this mess.
Only on Wolf’s site can you get information like this.
True. CNBC and Fox Business are a media entities dedicated to survivorship bias.
Headline on CNBC: “35-year-old risked parents’ house on $2.5M loan to start fashion brand—now it brings in $100M a year”
I wonder how many people risked their parents’ home, and failed? You won’t hear those stats from MSM.
…no different than the tried-and-true basis for any glitzy casino ad (…or, in older words, ‘…an exception that proves the rule…’ (see ‘hopium’)).
may we all find a better day.
Not on this, but simple too much allocation in individual stocks and bonds. Particularly Calpine and GM Bonds. Let’s just say I will never, ever pay capital gains again.
$760B lost in three years, what were they doing, trying to solve the CA homeless problem?
Those losses were almost certainly a result of funds escaping the company to fund founders lifestyles.
It’s genuinely difficult for me to comprehend the scale of some of these grifts.
Sickening to think that criminals have created generational wealth through what are ridiculous scams
I think the time to begin shorting the Nasdaq is drawing ever closer.
Or it could continue going up for another year.
Anyone who know Kemp knows he’s incompetent. He got lucky at classmates dotcom, but was a total failure at NASA, Nebula, and now Astra. Investors who met with him yet still invested deserve the loss for not doing their diligence on this character.
pantheon of imploded stock exemplar.
apart from the obvious, people need to check their politics at the door. these comments about liberal this liberal that have no connection to this article, imagined or real. some ceo founder takes investor for a ride and bilks retail investors along the way is a story as old as your views.
seriously make a few friends outside of your circle and experience something bold, which in your case might be to go to a restaurant downtime and eat sushi.
or to a BBQ restaurant full of dented square body pickups….. Blade cuts both ways. I go to both. I find the patrons at BBQ more friendly than at the sushi restaurant. Fewer people’s noses stuck to their phones.
When I saw the news this morning was wondering if it would get a spot in your pantheon of imploded stocks. You didn’t disappoint.
Just a few days ago many stock tip sites doing technical analysis had it as a buy or even strong buy. So much for said analysis. Quantitative sites listed it as an undervalued stock worth about 800% its current price (as of a few days ago). Ditto that analysis. Would be nice to know what some of these Robo advisor services were showing about it. I did see some moving average based sites showing it as the strongest sell signal.
I think the main culprit is the media. They keep sensationalizing new forms of investments like Cypto, SPAC, venture capital LPs as the “smart” way to go. I remember putting Chamath Palihapitiya on every magazine cover as the SPAC king, or Sam Brankman-Fried as the genius kid on the block. This is what is getting regular people in trouble because the media is “certifying” this fraud. Nothing excite me more than Warren Buffet annual letter, just “old school” with proven results.
Tesla will be the next entry into Wolf’s imploded stock list. China is building a factory in Mexico to make electric cars for a retail price of $11,000. When these glorified golf carts start hitting the US market in mass, then you may as well kiss Tesla goodby, along with the unionized auto workers in Detroit and elsewhere.
I could see the US not allowing them into the market.
Tesla ALREADY made it into the pantheon of Imploded Stocks, in Dec 2022.
https://wolfstreet.com/2022/12/24/tesla-joins-my-imploded-stocks-70-from-peak-object-of-religious-veneration-turns-into-automaker/
But then it weaseled back out of it in 2023, and now it’s getting closer to going back to the pantheon where it belongs — but not for the reason you state.
Tesla’s sales will continue to run over the legacy automakers, and its aggressive pricing strategy (price cuts) is exactly what Americans need. Tesla wants to be the #1 automaker in the world, and it’s plowing its profit margins into growth, not share buybacks. That is great for consumers, but it wrings out the mania from the stock.
Pure wisdom.
Who expects the Tesla Supercharging stations to shrink?
Not me.
I forgot to mention, when are they going to get rid of that tax credit for rich people to buy Teslas. Why should some working stiff subsidize some fat cat’s transportation. I see Teslas all over around here in this county owned by people living in 2 million dollar homes. When those tax subsidy expires Tesla will join the Wolf imploded stock list. Good.
Tesla had years ago run out of the tax credits, and its sales soared nevertheless. It didn’t need the credits. The legacy automakers needed them.
All of the EV tax credits should be eliminated, including for those who buy EVs
What was supposed to be the market for these rockets, assuming all the tech was solved? As far as I know, ex: military, the end users are: satellite launches and a much smaller market: tourist rides for billionaires who think 500, 000 feet up is travelling to outer space.
I’m getting the feeling that these meme investors are merely financing
most elaborate parties in history for corporate founders.
Have to wonder if these two insiders managed to cash out enough earlier to now finance the 50 cent funeral.
And did I see a volume of over 1.8 million shares today between 57 and 58 cents? Who are these “traders” and where do they go once the deal is consummated at 50 cents.
Man, I just don’t understand “high finance”. Who are today’s buyers at 57 cents a share with a done deal to go private at 50? I guess there is some method to this madness but I don’t get it.
They are recycling the shell and later it could emerge as an AI stock.
Does AI in this case stand for Alternative Illusion?
So investors ponied up enough cash to pay execs to tank the company to the point where the execs could buy it?
Sounds like The Producers.