They’ve been dropping like flies. In just the last 3 months, air taxi hopefuls Lilium Air Mobility and Volocopter filed for insolvency.
These companies believed they had the better electric Vertical Take-Off and Landing (eVTOL) design, a flying, urban taxi of sorts whose number of passenger seats can be counted on just one hand while flying short urban hops.
Like moths to a flame, often naïve investors were attracted to this flypaper because it allowed them to deploy huge amounts of capital to invest all in one place, which handily beat a 0.25% passbook savings account during the period of low interest rates. Few likely appreciated the full cost of development and certification to carry passengers ($ billions), and the time it can take to successfully execute from concept to entry into service (a decade). Highly regulated aviation is by no means the traditional 2-3 year investment flip.
At one time there were upwards of 300 different eVTOL design hopefuls seeking capital. Only a few of them have raised sufficient funds to float to the top and become common names in the industry such as Joby, Archer, Beta and the aforementioned Lilium and Volocopter which now must rely on sufficient recapitalization. Established aircraft manufacturers have also put a few chips on the table by creating their own eVTOL divisions such as Embraer, Airbus, Boeing and Bell Textron.
Joby stock (JOBY) has a 5-year monthly beta of around 2.0 meaning that its price volatility is twice that of the S&P 500. Daily stock price swings of plus or minus 10 percent are common and not for the faint of heart. Of late the company is pushing towards a loss of one-half billion dollars a year, yet daily trading volume still averages around 19 million shares with a 52-week low of $4.50 and a high of $10.72.
On a positive note for Joby, the weakening and possible elimination of Lilium and/or Volocopter takes away some of the early competition allowing a larger Joby market share should the industry develop. Even if these competitors get a second chance, it’s conceivable that any new investors would be more attracted to the value of any intellectual property (IP) that was developed, rather than to continue the program.
On the flip side, the failure of Lilium and Joby demonstrates that even with appreciable sums of investment, success cannot be guaranteed, nor can the size of the available market. Further, challenges remain in the areas of regulatory, ground and airspace infrastructure and a host of other design and market gotchas that must be addressed.
Adding to the uncertainty Bill Morgan, a JP Morgan analyst, recently downgraded the stock outlook from neutral to underweight, adding that it was time for an “altitude adjustment” for Joby’s stock.
Whether Joby or any other active eVTOL company can tough it out and avoid the fate of Lilium and Volocopter remains to be seen. At the end of the day, any program will still have to demonstrate an achievable ROI and breakeven time horizon. To do so first requires a proven end-user business model, which has yet to be demonstrated.
