The race to develop electric vertical take-off and landing aircraft (eVTOL) is on the rise, with several startups demanding to become the first mover in the air taxi industry.
Many of these companies are choosing to go public by merging with Special Purpose Acquisition Companies (SPACs) because this path to market doesn’t rely on historical financial results and allows companies to make ambitious projections.
The group includes Qell (NASDAQ: QELL), Reinvent technology partners (NYSE: RTP) and Atlas Crest investment (NYSE: ACIC), which are in the process of merging with Lilium, Joby Aviation and Archer Aviation, respectively.
Vertical Aerospace is the newest member of the eVTOL SPAC boom and announced its merger on Thursday Broadstone takeover (NYSE: BSN).
Waiting for the market launch
Founded in the UK in 2016, Vertical says the time has come for eVTOL aircraft thanks to advances in technology and improved economics. The company’s flagship is the VA-X4, which can carry 5 passengers, has a range of more than 100 miles, and can reach speeds in excess of 200 miles per hour.
Similar to Joby and Archer, the VA-X4 uses an open propeller design. In contrast, Lilium uses proprietary Ducted Electric Vectored Thrust (DEVT) technology, which enables leaner designs and obscures the propellers. Archer announced more details on its Maker aircraft this week and unveiled a new prototype at a virtual event on Thursday.
Vertical is still in the development phase and is currently not generating any sales. Deliveries are set to begin in 2024, with the company planning to deliver 50 aircraft that year for $ 192 million in revenue. Vertical predicts the units will grow to 2,000 in 2028, which would bring in $ 7.3 billion in sales.
The company has secured conditional pre-orders from major players who are also investing in the merger. American Airlines (NASDAQ: AAL) placed conditional pre-orders for up to 350 aircraft. Avolon, the world’s second largest aircraft rental company, plans to buy up to 500 aircraft, with Virgin Atlantic expressing interest in 150 vehicles. It all adds up to a potential unit sale of 1,000, which equates to $ 4 billion in revenue if Vertical can do it.
How the merger is built
The transaction gives Vertical an equity valuation of $ 2.2 billion. Broadstone has approximately $ 305 million in escrow, and SPAC has provided an additional $ 89 million for PIPE (private investment in public equity) funding. Prominent investors attending PIPE are among the prominent investors Microsoft’s (NASDAQ: MSFT) Venture Arm M12, American Airlines, Avolon, Honeywell (NASDAQ: HON) and Rolls Royce (OTC: RYCEY), among others.
After the transaction costs are paid, an estimated $ 344 million of the cash will be added to the combined company’s balance sheet. Vertical’s existing investors will retain a 72% stake, SPAC’s public shareholders will own 14% and Broadstone will transfer its existing 3% stake. Avolon will own 4%, American Airlines will own 5%, and the rest of the PIPE investors together will own 2%.
The merger is expected to close in the second half of 2021, when the ticker symbol changes to “EVTL”.
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