Capitalism in space: The merger deal between the Italian orbital tug company D-Orbit and the special purpose acquisition investment company (SPAC) Breeze has been canceled.

The Italian company had hoped to raise $185 million from the deal to expand staff and accelerate investments in ION Satellite Carrier, its orbital transfer vehicle (OTV) that completed its first commercial mission in late 2020.

However, “financial markets have changed substantially” since the deal was announced Jan. 27, Breeze CEO Douglas Ramsey said, amid rising interest rates, soaring inflation, and an ongoing war in Ukraine. “As we look ahead, we remain focused on identifying another value creating opportunity for Breeze shareholders,” Ramsey added.

A SPAC is a shell company designed solely to gather investment capital that is then used to either buy or merge with another company. In the process the company that is taken over goes public, its stock available on the stock market for trade. There have been a number of such takeovers in the space sector in the past few years, but most have turned out poorly for the investors in those SPACs, as noted in the article:

Of the nine space companies that went public through SPAC mergers in 2021, only Rocket Lab’s shares finished the year trading above their price when the merger closed. [Ed: both Virgin Galactic and Astra are examples of these failures.]

Demand for new SPAC deals has also been waning amid declining investor appetite for risk and increasing regulatory scrutiny over how these blank check firms operate. More than 40 SPAC mergers have been canceled so far this year, reported Bloomberg.

To put it more bluntly, investors have found these SPACs to be poor investments, and are bailing from them. This is likely what happened at Breeze, thus forcing the cancellation of the deal with D-Orbit.