Vertical Aerospace will receive US$205 million in additional financing to support certification and commercialization of its VA-X4 eVTOL air taxi, the company announced this week.
The global investment firm Mudrick Capital Management is contributing $200 million of that total in the form of convertible senior secured notes. The remaining $5 million will come from the industrial investment company Kouros SA, which will contribute to Vertical’s private investment in public equity (PIPE) as the eVTOL developer seeks to go public through a combination with the special purpose acquisition company (SPAC) Broadstone Acquisition Corp. (NYSE: BSN).
The infusion comes at a critical time for Vertical Aerospace. The company, which announced its deal with Broadstone in June, was late to join the SPAC craze, missing out on the large PIPEs that buoyed some of its rivals.
Archer, Joby, and Lilium, which announced their own SPAC deals in February and March of this year, secured fully committed PIPEs of $600 million, $835 million, and $450 million, respectively.
Just a few months later, however, the PIPE market had tightened considerably. American Airlines, Avolon, Honeywell, Microsoft’s M12, Rolls-Royce, and 40 North all contributed to Vertical Aerospace’s PIPE, but with the additional investment from Kouros, it still totals just $94 million.
That leaves Vertical more dependent on Broadstone’s $305 million cash held in trust. Because SPAC shareholders can choose to redeem their shares at the time of the business combination, Vertical is not guaranteed to receive that total, and mass redemptions have become relatively common in the SPAC market.
Shareholder redemptions for Archer’s business combination were 48.5%, while Joby and Lilium both saw redemptions of around 65%. Similar redemption rates for Vertical’s merger would result in just $106 million to $157 million of Broadstone’s cash held in trust flowing to Vertical.
Just how much money it will take to certify an eVTOL air taxi is still unknown. Some industry observers predict that each certification program will run to over $1 billion, but Vertical is optimistic it can certify the VA-X4 by 2024, develop a manufacturing facility, build out its commercial platform, and scale production for just $250 million.
Vertical is counting on the involvement of strategic partners like Honeywell and Rolls-Royce to reduce its own capital costs, compared to eVTOL developers that are tackling more of their aircraft development in house. The company is also banking on what it says is the largest conditional pre-order book in the eVTOL industry, with customers including American Airlines, Virgin Atlantic, Avolon, Bristow Group, Iberojet, and Marubeni Corporation pre-ordering up to 1,350 aircraft worth $5.4 billion.
“We are very excited to be partnering with Vertical Aerospace as it executes on its well-defined plan to certify and produce eVTOL aircraft,” Mudrick Capital founder Jason Mudrick stated in a press release.
“The company is led by an exceptional team, developing an innovative aircraft, that has created an unrivalled partner ecosystem, with what we believe is the largest announced conditional pre-order book in the industry. With this investment, the company now has the proper capitalization to bring electric flight into commercial operation by the middle of this decade and move towards high-scale production.”