Volocopter has canceled its plans to go public through a merger with a special purpose acquisition company (SPAC), according to accounts in German media.
FinanceFWD reported on Friday that the German eVTOL developer told investors it was abandoning the planned business combination due to the current “extremely unfavorable” environment for SPAC transactions. The company was said to have signed a non-binding letter of intent with a Nasdaq-listed SPAC over the summer.
Volocopter declined to comment on the reports, although a spokesperson confirmed to eVTOL.com that the company sent a confidential letter to its Seedmatch crowdfunders this week. In June, Capital reported that these 750 small investors, who provided the company with much-needed funding in its earliest days through profit participating loans, feared being pushed from the company before its public listing.
Volocopter reportedly offered them the opportunity to participate in the SPAC combination provided it was initiated before the end of the year. With those plans now off, the Seedmatch investors are only entitled to repayment of their loan plus interest at the rate of one percent — an amount that “does not even cover the inflation rate,” one disgruntled crowdfunder told FinanceFWD.
Volocopter’s spokesperson told eVTOL.com that the company could not comment on the content of its letter to the Seedmatch investors. “That being said, Volocopter will always fully comply with our contractual obligations towards loaners, investors, or partners,” she wrote in an email.
Volocopter’s interest in going public via SPAC dates at least to December last year, when then-chief financial officer Rene Griemens told eVTOL.com, “We think SPACs are a great financing option for our industry.”
At the time, mergers with these publicly listed, so-called “blank check companies” were seen as a way for pre-revenue companies to circumvent the restrictions on forward-looking statements associated with conventional initial public offerings. As Griemens put it last year: “SPAC transactions allow you to educate investors in a private setting and allow you to make future-oriented statements, which are important for future-oriented industries like eVTOL or electric vehicles.”
However, while rival eVTOL developers Archer, Joby, and Lilium all announced SPAC deals in February and March, at the peak of investor enthusiasm for the vehicle, Volocopter delayed, instead announcing a $240 million Series D funding round in early March. SPAC mania began waning soon thereafter, especially once the U.S. Securities and Exchange Commission signaled that it would be looking at these business combination agreements more critically.
By the time Joby, Lilium, and Archer completed their SPAC combinations in August and September, many SPAC investors were choosing to redeem their shares at the time of the transaction rather than remain invested in the combined company. Joby and Lilium both saw shareholder redemptions of around 65%, while Archer managed to hold redemptions to 48.5% only by slashing a billion dollars off its valuation. These mass redemptions significantly reduced the amount of capital available to each company, compared with their initial projections.
According to FinanceFWD, Volocopter told Seedmatch investors that the prospect of mass redemptions was a principal reason why it decided that a SPAC combination is too risky at this time. Meanwhile, Volocopter’s spokesperson confirmed to eVTOL.com that Griemens left the company at the end of September, with chief commercial officer Christian Bauer now filling in as interim CFO.
“Volocopter remains open to considering all forms of financing and always evaluates which form of financing best suits our long-term company strategy,” the spokesperson stated.