• 24 Feb 2021 04:13 PM
• 2

SPACtacular Financing: Billions Coming for eVTOL

By Kenneth I. Swartz

Vertiflite, March/April 2021

A year after the electric vertical takeoff and landing (eVTOL) aircraft industry saw its first start-up valued at more than $1B (see “The First Electric VTOL Unicorn: Joby Aviation,” Vertiflite, March/April 2020), a growing number of companies across the advanced air mobility (AAM) industry are looking to merge with a Special Purpose Acquisition Company (SPAC) that is already publicly traded to raise the funds necessary to bankroll future growth.

Since late 2020, at least a half dozen companies active in the AAM sector have been rumoured or have announced that they intend to complete a business combination with a SPAC.

The eVTOL companies that secured significant investments prior to the COVID-19 pandemic found themselves in a relatively good position when funding became tighter for start-up companies of every sort. Most of these companies successfully raised capital through seed, Series A, Series B and Series C funding rounds with external investors who were offered equity or part ownership in the company (see “Financing the Electric VTOL Revolution,” Vertiflite, July/August 2020).

Also called initial public offerings (IPO) by “blank-check companies,” a SPAC is a publicly traded shell company created solely to raise funds and merge with a privately owned business, giving the start-up a stock market listing (and ticker symbol) in as little as eight weeks. Once a company is listed on a stock exchange, it must file regular and timely reports that meet the disclosure requirements of the US Securities and Exchange Commission (SEC). Essentially, a SPAC can offer an early stage but high-growth company with a capital-intensive launch plan a faster IPO process, along with experienced partners within the SPAC guiding the operation.

The number of SPACs has surged during the pandemic, with more than 240 going public in 2020 (with an average size of $335M) according to The New York Times. And more than 120 SPACs having gone public in the first six weeks of 2021, raising almost $40B for potential acquisitions, according to data compiled by Bloomberg.

Typically, a financer will raise a SPAC fund and then search for a takeover target. Once the SPAC and its target firm have agreed to initial terms, the two will jointly approach investors for a private investment in public equity (PIPE), who also buy into the transaction. The size of the PIPE investment often exceeds the notional value of the SPAC itself. A number of electric vehicle automotive companies raised funds through SPAC transactions in 2020.

Blade Urban Air Mobility
On Dec. 15 (a week after Joby Aviation announced it was acquiring Uber’s Elevate business and Uber had committed to invest $125M in Joby), Blade Urban Air Mobility, Inc. announced that it would be merging into a subsidiary of a SPAC called Experience Investment Corp. (NASDAQ: EXPC) and moving ahead with plans to operate eVTOL aircraft in the future.

The creation of Experience Investment Corp. was sponsored by an affiliate of KSL Capital Partners, a private equity firm specializing in premium travel and leisure enterprises. The company first went public in September 2019 and initially raised $275M, plus another $125M through a fully committed common stock PIPE for a total fundraise of $400M. The transaction should close in the first half of year, resulting in an estimated equity value of $825M for Blade.

“This transaction provides the capital for Blade to profitably expand its urban air mobility business using conventional rotorcraft today, while providing a seamless transition to eVTOL aircraft tomorrow," said Rob Wiesenthal, founder and chief executive officer (CEO) of Blade, in a press release announcing the transaction.

On Feb. 18, Blade announced an alliance with Vertiport Chicago, a fixed-base operator (FBO), and an operating partnership with Part-135-operator Helicopters, Inc. to fly Blade passengers to a number of destinations. The vertiport will be rebranded “Vertiport Chicago Powered by Blade.” Blade will also work with the vertiport to ensure it has the necessary infrastructure to support the transition to eVTOL aircraft in the future.

KSL also owns Ross Aviation, which owns 17 FBO locations in the US and the Cayman Islands, including two locations at Westchester County Airport in White Plains, New York. No stranger to helicopters, KSL is also co-owner of Altera Mountain Company (with Henry Crown and Company), which owns 15 ski resorts as well as CMH Heli-Skiing & Summer Adventures, the world’s largest heli-skiing and heli-hiking operation, and Alpine Aerotech, a worldwide helicopter maintenance, repair and operations (MRO) provider, both based in British Columbia, Canada.

Archer Aviation
On Feb. 10, Archer Aviation and SPAC Atlas Crest Investment Corp. (NYSE: ACIC) announced they would merge and the new company would be listed on the New York Stock Exchange (NYSE) under the ACHR ticker symbol.

On the same day, United Airlines announced a purchase agreement for up to $1B of its four-passenger (plus pilot) aircraft and options for an additional $500M, totaling 200 aircraft. 

Atlas Crest was sponsored by an affiliate of Moelis & Company, a leading global financial advisor. Archer is expected to receive $1.1B in gross proceeds including $500M held in trust and $600M in a PIPE funded by leading strategic and financial investors, including United Airlines, Stellantis (formed by the merger of Groupe PSA and Fiat Chrysler Automobiles in January) and the venture arm of Exor, Baron Capital Group, the Federated Hermes Kaufmann Funds, Mubadala Capital, Putnam Investments and Access Industries.

The SPAC deal and the United order put Archer’s value at $3.8B. Archer’s first demonstrator aircraft is expected to be unveiled later this year.

eCTOL Pioneer Ampaire
On Feb. 18, Surf Air Mobility Corp. of Los Angeles announced that “it has entered into a definitive agreement to acquire hybrid electric aviation technology pioneer Ampaire.”

In September 2020, Surf Air Mobility announced a $200M investment commitment from Luxembourg-based Global Emerging Markets Group (GEM) to take the company public and the appointment of Fred Reid.

In his three-decade aviation career, Reid guided the launch of Virgin America as founding CEO, and also served as president and chief operating officer (COO) for both Delta Airlines and Lufthansa. Reid was also President of Cora Aircraft Program (now Wisk, a joint venture between Kitty Hawk Corporation and The Boeing Company), where he supervised the development of the company’s first autonomous electric vertical takeoff and landing (eVTOL) aircraft and established certain operations in New Zealand. Reid was most recently the Global Head of Transportation for Airbnb.

Ampaire has been flying the Electric EEL, a hybrid electric conventional takeoff and landing (eCTOL) conversion of the Cessna 337 Skymaster (see “Catching Up on the State of eCTOL Aircraft,” Vertiflite, Nov/Dec 2020).

“Surf Air Mobility intends to make hybrid electric powertrain upgrades available to fleet owners on and off its consumer platform, as well as license its technology to original equipment manufacturers (OEMs) for new aircraft types,” said the press release.

New Vista Acquisition Corp.
New Vista Acquisition Corp. (NASDAQ: NVSAU) filed a preliminary prospectus on Jan. 8 to raise $200M for a SPAC that will subsume emerging aerospace companies developing eVTOL aircraft or related AAM technology. This was raised to an IPO of $240M that began trading on Feb. 17.

Former Boeing CEO Dennis Muilenburg is the chairman, and the board includes leading aerospace, military, tech sector and financial sector leaders. AirFinance founder Kirsten Bartok Touw, a regular speaker at VFS meetings, is the co-president and COO of the new SPAC.

Reinventing the Leading eVTOL Developers
On Feb. 11, the Financial Times reported that LinkedIn co-founder Reid Hoffman and tech entrepreneur Mark Pincus were nearing a deal to merge their SPAC, Reinvent Technology Partners (NYSE: RTP), with Joby Aviation. The SPAC, which raised $1.6B for a $6.6B valuation, was announced on Feb. 24 as this issue was going to press. Joby is already the best-financed eVTOL developer (see “Joby Transitions,” Vertiflite, Jan/Feb 2021).

In a Feb. 11 article entitled, “Joby Aviation to announce $5.7 billion SPAC deal, Lilium and others to follow in banner month for eVTOL industry,” the news site evtol.com reported that Lilium is in talks with Qell Acquisition Corp. (NASDAQ: QELL), with a deal likely in the next few weeks. The article noted that Lilium has also been talking with Zanite Acquisition Corp (NASDAQ: ZNTE).

The article reported that Volocopter is also exploring the potential for a SPAC or reverse merger, and other companies are likely to be “SPAC’d” this year.

Takeaways
This incredible influx of funding promises to remove one of the biggest barriers for many of the leading AAM companies in what VFS has dubbed the “Electric VTOL Revolution.”

With huge amounts of capital now available due to the record peaks of the stock market and frequent analyst reports projecting AAM to be a multi-trillion-dollar market, there is a “fear of missing out (FOMO)” that is causing a rush to snap up the most promising AAM companies before it’s too late.

About the Author
Ken Swartz runs the agency Aeromedia Communications in Toronto, Canada. He specializes in aerospace market analysis and corporate communications. He’s worked in the regional airline, commercial helicopter and commercial aircraft manufacturing industries for 25+ years and has reported on vertical flight since 1978. In 2010, he received the Helicopter Association International’s “Communicator of the Year” award. He can be reached at kennethswartz@me.com.