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A troubled SPAC plans to buy iRocket for $400M but it already returned most of its cash | TechCrunch

Troubled SPAC Sets Sights on iRocket Acquisition Amid Cash Crunch

In a surprising twist in the volatile world of space tech investments, a beleaguered Special Purpose Acquisition Company (SPAC) known as Stellar Ventures Acquisition Corp. (SVAC) has announced plans to acquire iRocket, an emerging player in the reusable rocket sector, for a valuation of $400 million. The deal, revealed in a regulatory filing late Tuesday, comes at a precarious time for SVAC, which has already returned the majority of its raised capital to investors following a series of setbacks. This move raises eyebrows across the financial and tech communities, as it defies the conventional SPAC playbook where funds are typically preserved for high-profile mergers.

SVAC, which went public in early 2023 amid the tail end of the SPAC boom, initially raised $350 million through its initial public offering (IPO). The company was founded by a consortium of venture capitalists and former aerospace executives with the explicit goal of targeting innovative space and defense startups. However, like many SPACs that flooded the market in 2021 and 2022, SVAC has faced mounting challenges. Regulatory scrutiny from the Securities and Exchange Commission (SEC) has intensified, with new rules requiring more transparent disclosures and extended timelines for completing deals. SVAC's troubles began almost immediately after its listing on the Nasdaq, where it struggled to identify a suitable merger target within the mandated two-year window.

By mid-2024, investor impatience boiled over. A wave of redemptions—where shareholders opt to pull their money out rather than wait for a deal—eroded SVAC's trust fund. In a dramatic turn, the company announced in March 2025 that it would liquidate and return approximately 85% of its remaining cash, totaling around $280 million, to investors. This left SVAC with a skeletal war chest of about $50 million, far short of what's typically needed for a $400 million acquisition. Sources close to the matter, speaking on condition of anonymity, indicate that SVAC's board had been in quiet negotiations with iRocket for months, even as the liquidation process unfolded. The SPAC's leadership argues that the deal represents a "transformative opportunity" in the burgeoning space economy, but critics are skeptical about how it plans to finance the transaction without substantial external funding.

iRocket, founded in 2018 by aerospace engineer Elena Vasquez, has positioned itself as a disruptor in the small satellite launch market. The company specializes in developing low-cost, reusable rockets designed for rapid deployment of payloads into low Earth orbit (LEO). Unlike giants like SpaceX, which dominate with heavy-lift capabilities, iRocket focuses on niche missions, such as deploying constellations of micro-satellites for telecommunications and Earth observation. Its flagship product, the iR-1 rocket, boasts a unique hybrid propulsion system that combines liquid oxygen with eco-friendly biofuels, aiming to reduce launch costs by up to 40% compared to traditional methods. iRocket has already secured contracts with government agencies, including a $50 million deal with NASA for experimental launches, and partnerships with private firms like satellite operator Iridium.

The proposed acquisition values iRocket at $400 million, a premium over its last funding round in 2024, where it raised $120 million at a $250 million valuation from investors including Andreessen Horowitz and Boeing Ventures. If completed, the merger would take iRocket public via SVAC, providing it with access to capital markets at a time when venture funding for space startups has tightened. iRocket's CEO, Vasquez, expressed optimism in a statement: "Partnering with SVAC allows us to accelerate our roadmap toward commercial viability. We're not just building rockets; we're democratizing access to space." However, the deal's structure is unconventional. SVAC plans to fund the acquisition through a combination of its remaining cash, new debt financing, and potentially a private investment in public equity (PIPE) round. Insiders suggest that major backers, including hedge funds and strategic investors from the defense sector, are being courted to inject fresh capital.

This isn't SVAC's first brush with controversy. The SPAC previously flirted with a merger with AstroDynamics, a satellite manufacturing startup, but that deal collapsed in late 2024 amid valuation disputes and regulatory hurdles. The fallout led to a class-action lawsuit from shareholders alleging misleading statements about the company's prospects. SVAC's stock, which debuted at $10 per share, has plummeted to around $2.50, reflecting broader market disillusionment with SPACs. According to data from SPACInsider, over 60% of SPACs that went public between 2020 and 2023 have either liquidated or merged at significant discounts, highlighting the model's inherent risks.

The timing of this announcement is particularly intriguing given the evolving landscape of the space industry. With SpaceX's Starship program advancing and competitors like Blue Origin and Rocket Lab gaining traction, smaller players like iRocket are under pressure to scale quickly. The global space economy is projected to reach $1 trillion by 2040, per Morgan Stanley estimates, driven by satellite internet, space tourism, and defense applications. Yet, funding challenges persist; venture capital investments in space tech dropped 25% in 2024 amid economic uncertainty.

Experts are divided on the deal's feasibility. "This is a Hail Mary pass for SVAC," said Dr. Miriam Kessler, a finance professor at Stanford University specializing in alternative investments. "Returning most of the cash signals a lack of confidence, and now they're asking new investors to step in. It's risky, but if iRocket's technology pans out, it could be a steal." On the other hand, supporters point to successful SPAC turnarounds, like the 2021 merger that birthed Lucid Motors, which overcame initial skepticism to become a key player in electric vehicles.

Regulatory approval remains a wildcard. The SEC, under Chair Gary Gensler, has cracked down on SPACs, mandating enhanced due diligence and fair value projections. SVAC's filing acknowledges these risks, noting potential delays or even deal termination if investor redemptions spike again. Additionally, antitrust concerns could arise, though iRocket's small market share makes this unlikely.

For iRocket, the merger represents both opportunity and peril. Going public via SPAC could provide the funds needed to ramp up production and compete globally, but it also exposes the company to stock market volatility. Vasquez has emphasized iRocket's milestones, including a successful test flight in April 2025 that demonstrated the iR-1's reusability over multiple launches. The company aims to achieve full commercial operations by 2027, with plans to launch 50 missions annually.

Investors are watching closely. SVAC's shares jumped 15% in after-hours trading following the announcement, a rare bright spot for the embattled firm. However, trading volume remains low, and analysts from firms like Goldman Sachs have issued cautious notes, rating the stock as a "hold" pending more details on financing.

Broader implications for the SPAC market are significant. Once hailed as a democratizing force for startups to go public without traditional IPO rigors, SPACs have fallen out of favor. The number of new SPAC IPOs in 2025 is down 80% from the 2021 peak, per Dealogic data. Deals like this one could either revive interest or underscore the model's flaws.

In interviews with TechCrunch, industry insiders speculate on what might come next. "If SVAC pulls this off, it could inspire a mini-revival in space-focused SPACs," said venture capitalist Raj Patel of SpaceFund. "But the cash return is a red flag—it's like proposing marriage after giving away the dowry."

As the deal progresses toward a shareholder vote expected in Q4 2025, all eyes will be on whether SVAC can secure the necessary funding and navigate regulatory waters. For iRocket, this could be the launchpad to stardom or a cautionary tale in the high-stakes game of space innovation. The saga underscores the unpredictable nature of merging cutting-edge tech with Wall Street's unforgiving mechanics, where ambition often collides with financial reality.

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