What happened

Stable Road Acquisition (NASDAQ:SRAC), a special purpose acquisition company (SPAC), saw its shares jump 16.4% in January, according to data provided by S&P Global Market Intelligence. The market is growing increasingly excited about Stable Road's merger partner, and is buying in ahead of the deal closing.

So what

In October, Stable Road agreed to merge with Momentus, a privately held space company that intends to offer in-space transportation services. Think of Momentus as a tow company for space, providing services including moving satellites back into their intended orbits and getting space debris out of the way.

Artist rendering of a Momentus spacecraft in action.

Image source: Momentus.

The business is speculative, but intriguing, and once the deal closes Momentus will have a public stock and more than $300 million in cash to put its plan in action.

Much of January's gain was likely due to speculation about potential large owners for the stock. Cathie Wood's Ark Invest announced plans during the month to launch a new space-focused exchange-traded fund (ETF), causing shares of Stable Road and a number of other space-related companies to rocket higher in anticipation that the new ETF would include them in its stock basket. 

Now what

The Stable Road/Momentus deal should close soon, eliminating any lingering uncertainty about the pending merger and bringing Momentus to public markets.

Momentus is an incredibly exciting idea, but it's hard to overstate how speculative it is at this point. Investors who want to buy in should limit companies like Momentus to a small part of a well-diversified portfolio.

Given the risks, this is the ideal sort of a stock to own in a basket with other early-stage space-related companies. With that in mind there is good reason investors would get excited about Ark's plan to start a space ETF, which should allow stocks like Momentus to come along for the ride.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.