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AI rebrands sell stories, not products. The same pitch cost SPAC investors billions

AI rebrands have revived the SPAC craze’s promise of a business to come. Their shareholders lack the safeguards written after those deals collapsed

Charly Triballeau / AFP via Getty Images

In May, Hoth Therapeutics, a Hoboken, N.J., company developing cancer drugs, renamed itself Rocket One and told investors it would build AI chips for satellites. The change came two months after Hoth's auditor raised "substantial doubts" about whether the company could stay in business. Rocket One says it has the exclusive license to a chip design that uses magnetism — instead of electrons moving through silicon — to run AI calculations and plans to sell AI hardware for small satellites and defense customers. The stock traded below $1 when Hoth announced the new name, according to the Seoul Economic Daily, and climbed to nearly $2 afterward.

Rocket One is one of dozens of companies that have renamed themselves around AI, and it's selling investors a story before it has a product to back it up. What Rocket One has licensed is a design. The chip hasn't been built as a working device, hasn't been tested in space, and hasn't been qualified for use by companies or government agencies. Rocket One has no commercial product.

Special-purpose acquisition companies (SPACs) made the same pitch in 2020 and 2021. They raised money from the public to buy businesses they hadn't picked yet, and investors who held on through the mergers lost most of their money. The SEC has since written rules to protect SPAC investors, but those rules cover only SPACs and similar companies that go public with no business of their own. They don't cover a company that's already public and simply changes its name. Rocket One was a drug developer already trading on Nasdaq $NDAQ, and it didn't need a merger to become something else.

The SPAC investors who paid for a story that didn't hold

In 2020 and 2021, investors poured money into SPACs, companies that existed only to buy a business they hadn't found........

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