Why Did Vertical Aerospace Stock Jump?

seekingalpha09-30

Vertical Aerospace faces significant dilution risk, needing $180 million more for certification, implying a 57% dilution and a post-dilution share price of $3.00.Despite a reverse stock split and ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhy Did Vertical Aerospace Stock Jump?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-30 09:23 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4724090-why-did-vertical-aerospace-stock-jump><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Vertical Aerospace faces significant dilution risk, needing $180 million more for certification, implying a 57% dilution and a post-dilution share price of $3.00.Despite a reverse stock split and ...</p>\n\n<a href=\"https://seekingalpha.com/article/4724090-why-did-vertical-aerospace-stock-jump\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4187","symbol_name":"航天航空与国防","start_time":0,"source_url":"https://seekingalpha.com/article/4724090-why-did-vertical-aerospace-stock-jump","article_id":"2471894819","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1398460358/image_1398460358.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2471894819","pubTimestamp":1727659419,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Vertical Aerospace faces significant dilution risk, needing $180 million more for certification, implying a 57% dilution and a post-dilution share price of $3.00.Despite a reverse stock split and anal","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4187":"航天航空与国防","EVTL":"Vertical Aerospace"},"translate_title":"垂直航空航天股票为何上涨？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"EVTL":0.9},"content_text":"Vertical Aerospace faces significant dilution risk, needing $180 million more for certification, implying a 57% dilution and a post-dilution share price of $3.00.Despite a reverse stock split and analyst buy rating, the stock remains unattractive due to high capital needs and uncertain commercial success.Leadership changes and progress in piloted testing are positive, but operational cash burn remains high, with funding only secured until Q2 2025.I maintain a sell rating, as other eVTOL companies like Joby, Archer, and Eve present less risk due to advanced certification and stronger industry backing.   XH4D In May 2023, I analyzed Vertical Aerospace (NYSE:EVTL) and concluded that the stock would likely fall due to continued need for capital raises, as is the case with many companies developing urban air mobility solutions. Since then, the stock has fallen nearly 60% moving contrary to the 39% jump for the S&P 500. In this report, I will discuss the way things stand now for Vertical Aerospace and discuss whether the investment case is more appealing. A 1:10 Reverse Stock Split For Vertical Aerospace In December 2023, Vertical Aerospace received a continued listing standard notice as the share price had fallen below $1.00. Unless the stock price recovered, it necessitated a reverse stock split which happened on the 20th of September with each 10 shares now representing one share. As a result, the stock price now is $7.07. The company now is compliant with the NYSE listing standards again, and that might have attracted some investors. However, I don’t believe that this is the reason why the stock jumped. Analyst Buy Rating To Have Contributed To Stock Price Jump In the trading session on the 27th of September, EVTL stock jumped 13.5%, but the stock price movement already started reversing on the 23rd of September and I believe that is driven by Canaccord Genuity reiterating its buy rating on the stock. The company adjusted its price target from $1.50 to $15 to account for the reverse stock split, and that price target implies more than 100% upside. However, it should be noted that essentially there was no change in the envisioned upside. Vertical Aerospace Makes Leadership Changes And Progresses On Piloted Testing Vertical Aerospace Other changes since my last coverage of Vertical Aerospace include the appointment of Stuart Simpson, who previously served as the company’s CFO, as CEO, replacing CEO and founder Stephen Fitzpatrick. Fitzpatrick will remain with Vertical Aerospace as a board member focusing on the business strategy, and he also continues funding of the company. Another noteworthy event and even a highlight was the completion of Phase 1 of piloted testing for the second prototype. The time from ground test to piloted tethered test was achieved three times faster than with the first prototype. The first phase of piloted testing includes verifying the stability of the aircraft including failure testing, ground vibration testing and taxi testing. The regulatory certification framework is also getting more color as the UK Civil Aviation Authority will be co-operating with the European aviation regulator and has granted scope extension of the Design Organisation Approval to Vertical Aerospace allowing engineers of the company to sign off on compliance items. Settlement With Rolls-Royce Tapers Operating Cash Flow Burn Vertical Aerospace Seemingly, the operating cash flow improved significantly from a £40.6 million operating cash flow burn to £14.5 million. However, this was driven by a $34 million settlement with Rolls-Royce, which exited the contract to design the electrical propulsion unit. Excluding this cash inflow, the operating cash burn would have been $42.5 million, which is slightly higher than last year. The company ended the first half of the year with £67 million and second half cash burn expected to be between £40 million and £45 million. So, the company is consistently burning around that figure for some time now, and it means that the company is funded until roughly Q2 2025. With certification expected in 2026. The company has to fund roughly another £135 million at least assuming certification by Q4 2026 or $180 million. In the first half of the year, founder Fitzpatrick funded $25 million as part of an investment agreement and via Imagination Aero Investments which is owned by Fitzpatrick another $25 million has been committed. So, the company needs another $155 million to sit through certification, calculated as the $180 million needed between Q2 2025 and Q4 2026 minus the committed funds that have yet to come in. At current share prices, that means that another 21.9 million shares plus 3.5 million shares for the second round of funding from Fitzpatric need to be issued at least. Currently, there are 19.1 million shares outstanding, which implies a 57% dilution at current share prices and an implied post-dilution share price of roughly $3.00. So, the dilution risk remains sky-high. Conclusion: Vertical Aerospace Is Not Attractive Yet  The reality of eVTOL manufacturing is that many players likely don’t have the funds to see their product in mass production, and dilution remains a risk as the unknown commercial success makes borrowing money nearly impossible. This leaves shareholders to fund the certification, and then we are not even talking about the initial costly production phase and hoping for customer downpayments to start pouring in. What we have continuously seen is that investors point to the backlogs and backing by big aerospace suppliers as a guarantee that eVTOL manufacturers will be a success. This year, however, showed that aerospace suppliers like Rolls-Royce are also able to walk away from their design contracts and milestone payments from customers are not coming in huge quantities yet. Ultimately, that means that Vertical Aerospace shareholders will be diluted as investors get stocks and warrants in exchange for investments. I don’t believe that the stock has become more attractive. As Vertical Aerospace is pacing through the certification process, the timeline risk is reducing, but the dilution risk remains unchanged. As a result, I am maintaining my sell rating as I do believe that other eVTOL companies such as Joby, Archer and Eve might have less risk for investors to absorb because they are either further in the certification process or have more solid industry and customer backing.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2471894819"}