eVTOL Stocks Will Leave Retail Investors High and Dry
We are currently tracking 465 companies in our Nanalyze Disruptive Tech Stock Catalog. Those companies represent not only 11 broad tech categories (and a twelfth dedicated to cannabis and other psychoactive consumables) but dozens of disparate products, applications, and markets. We’re MBAs, not geneticists, engineers, or software developers. Our beleaguered team of underpaid MBAs spend countless hours not just poring through SEC filings but researching everything from vertical farming to electric vertical takeoff and landing (eVTOL) aircraft, so we don’t sound completely stupid. That’s why we love to find legit research that we can leverage for our own analysis. We got particularly excited when we came across this “reality index” for eVTOL companies competing in the advanced air mobility (AAM) market from SMG Consulting, a firm that specializes in the aerospace industry.
AAM is just another way of saying urban air mobility (UAM), a pie-in-the-sky concept for developing an aerial transportation system that relies on eVTOLs. These all-electric and hybrid aircraft are designed for short-hop inter- and intra-city flights, featuring technologies that enable them to operate similar to drones by lifting off like a helicopter and then flying more like a plane. Most companies envision an Uber-like business model where passengers simply use an app to book a seat on a flying taxi. An optimistic report published last year claimed that eVTOLs can be cost competitive with cars on a pay-per-mile basis. At the moment, this is all mainly theoretical, as most companies are still in various proof-of-concept stages.
The AAM Reality Index is a ranking of the 28 most prominent eVTOL companies as of August 2023. SMG Consulting ranks the companies based on five criteria: funding, leadership, technology readiness, regulatory progress, and manufacturing capability. The screenshot above features the top 13, which includes all but one of the six eVTOL stocks that we’ve covered (and one we haven’t yet). We assume the list omits Blade Mobility (BLDE) because it is not in the business of manufacturing eVTOLs but is rather just an Uber for booking seats on third-party helicopters and seaplanes (and eventually eVTOLs).
It’s been a year since we last covered the industry, so let’s see what the top baker’s dozen of eVTOL manufacturers have been up to, focusing on the public companies first.
Short Sellers Short Circuit eVTOL Stocks
While some eVTOL companies optimistically predict commercial operations as soon as 2024, China-based EHang (EH) claims it will begin flying paying customers by the end of this year. At No. 5 on the Reality Index, the company reportedly completed its flight testing program and expects to receive the green light from Chinese aviation authorities any day now for its autonomous octocopter. That would put it way ahead of other rivals, which are going with pilots first rather than attempting full autonomy right off the launch pad. EHang was the first urban air mobility company we profiled, just before its late 2019 IPO.
Hangups with EHang
However, EHang did not make into our top eVTOL stocks list because it uses an opaque business structure called a variable interest entity (VIE) where shareholders don’t have a legal right to the shares they think they’re holding. Stalled revenues and a damning report by short activist Wolfpack Research offered more reasons to avoid the company.
Leery of Lilium
We’re also avoiding Lilium (LILM), a pre-revenue company developing a jet-powered eVTOL that sits at No. 13 on the list. Last year, a firm called Iceberg Research released two separate reports within days of each other that alleged Lilium was misrepresenting its flight testing, particularly the technology around its batteries. While the motivation behind these reports is often self-serving – short sellers hoping to sink a stock that they are betting against – that does not necessarily discount some of the allegations. As the saying goes, where there’s smoke …
Archer Stock on Fire
That brings us to Archer Aviation (ACHR), an eVTOL stock that suddenly caught fire a few months ago. It actually sits at No. 4 on the Reality Index, ahead of EHang, and is working with United Airlines and Stellantis, one of the largest automakers in the world. Both companies, along with ARK Investment, reportedly participated in an “oversubscribed” private investment round to the tune of $215 million, buying public shares at discounted rates. Archer also recently touted a deal with the U.S. Air Force worth up to $142 million. And, just a couple of weeks ago, the company announced its Midnight eVTOL received approval from the FAA to begin flight tests. You know the company is making progress because it has released 26 press releases this year alone.
However, if you were to believe another short-selling firm called Grizzly Research, Archer is allegedly misrepresenting its progress and pumping up its stock in the process. Again, take it all with a grain of salt, but news has since emerged of potential class-action lawsuits over “alleged securities fraud, unlawful business practices, and potential breaches of fiduciary duty to their shareholders.” Next.
Status of Other eVTOL stocks
Joby Not Getting the Job Done
Earlier this year, we did a breakdown of Joby in a video article. We did not find much to like in the No.1 eVTOL company, which originally promised investors it would generate more than $130 million in revenue by 2024. In reality, Joby is still years away from meaningful revenues and will likely need more money to cross the finish line. That usually means diluting existing shareholders or taking on high-interest debt in today’s risk-averse market.
Vertical Remains Horizontal in eVTOL Race
Meanwhile, UK-based Vertical Aerospace, which promised investors it would hit nearly $200 million in eVTOL sales by next year, is currently near a market cap low of $265 million – down from about $1.6 billion back in March 2022. And, as far as we can tell, Vertical is not nearly as far along as Joby in certifying and testing its aircraft. The company is pursuing certification in multiple jurisdictions outside of the UK, including the United States, European Union, Japan, and Brazil, but commercialization isn’t likely until 2027, according to the SMG Reality Index.
Eve Air Mobility is Latest eVTOL SPAC Stock
One eVTOL stock that slipped our notice is Eve Air Mobility, a 2020 spinoff of Brazilian aircraft manufacturer Embraer. Like all the other public eVTOL companies in existence today, Eve Air Mobility earned its ticker symbol by merging with a special purpose acquisition company (SPAC) in 2022. By that time, institutional investors had grown leery of these backdoor SPAC deals (see our recent video about why SPACs crash) and redeemed more than 92% of the $230 million in the trust from the SPAC’s 2020 IPO. Fortunately, private investors carried the day with $357 million, including $185 million from Embraer, which is the majority shareholder in the nascent eVTOL company.
Eve Air Mobility claims it will start selling eVTOLs by 2026 but the timeline appears a mite optimistic, given it is far behind other companies on this list, which are far behind their own timelines. Amazingly, the pre-revenue company still sports a market cap of about $2 billion, compared to Embraer, which is worth just $3 billion on $4.5 billion in 2022 revenue. Investors may be feeling optimistic after an announcement involving a collaboration with United Airlines on bringing advanced air mobility to the abandoned city formerly known as San Francisco. That was one of 19 press releases Eve Air Mobility has issued since March. Don’t feel so special, Eve, because United is in bed with about half the eVTOL companies out there.
The Rest of the Best eVTOL Companies
Obviously, there are plenty of other PR hacks churning out press releases for private eVTOL companies touting their progress on spending hundreds of millions of dollars. For instance, there’s a company called Beta Technologies, founded in 2017, that has raised nearly $900 million. Fidelity is the marquee name among the short list of investors for the No. 2 eVTOL company on the index. Beta is distinguishing itself by pursuing an all-electric conventional takeoff and landing (eCTOL) aircraft, which uses airport runways, while also developing a conventional eVTOL. The company believes the lack of tilt rotors results in better range for a cheaper price, with an easier path to certification.
Volocopter is a German eVTOL outfit that has raised at least $780 million. It claims to have conducted some 2,000 test flights across seven different eVTOL models since making the first transnational eVTOL flight more than a decade ago. We started covering the startup back in 2016 as one of a handful developing flying cars. No doubt commercialization is just around the corner in 2024. Or is it in 2026?
There are also a number of corporate-backed eVTOL projects in the mix. The most prominent is Wisk, which had raised at least $450 million as a joint venture between Boeing and Kitty Hawk, a now defunct electric aircraft manufacturer that we also profiled in that 2016 article. Earlier this year, Wisk became a completely owned subsidiary of Boeing. The company is one of the few pushing full steam ahead with a fully autonomous four-seat eVTOL air taxi. Wisk is also licensing its autonomy tech to Archer Aviation, after the latter decided to settle a lawsuit alleging it had stolen trade secrets and infringed on its patents.
As you can see, there is never a dull moment in the eVTOL industry. But, as retail investors, we kind of crave a certain repetition, usually in the form of recurring revenues with high gross margins. Instead, with eVTOL stocks, expect recurring losses with a high degree of uncertainty of success. In the Nanalyze Reality Index, we continue to rate all eVTOL stocks as an avoid.