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# Highlights
Vertical's ($EVTL) management had a very adamant obsession with trying not to dilute existing shareholders. This was probably driven by a handful of large investors having sway on corporate decisions.
Because of this, they walked a fine line, basically carrying 6-12 months worth of liquidity at all times.
Meanwhile, the project they were working on had a 'forecasted' 3-4 year timeline. So the survival of the business was heavily reliant on their ability to raise fresh capital on favorable terms.
That came to a head this year as the stock price started falling. This was caused by a few things:
1. They introduced a brand new aircraft concept - this basically reset the clock on their timeline for certification and commercialization (they forecasted <4 years, but anyone with industry experience could have told you this would be a 6+ year endeavor).
2. That aircraft concept wasn't well received, anyway. It had pretty outlandish specs for an electric aircraft.
3. They were aiming to bring in a 'trusted partner' to help share the cost and development burden. Apparently that fell through.
4. They started brining on debt and other 'exotic' liability financing.
My guess is that they expected a bigger pop in the stock price following the new aircraft (Valo) reveal that would have set them up on better terms for a new share issuance. When that didn't come, they decided to wait it out. The bludgeoning of risk-on stocks this year amplified these issues. The 'trusted partner' search falling through and chairman & face of the company leaving were the final nails in the coffin.
This was all a huge misstep from management. They were valued at close to $700M (give or take) last year when the risk-on category was flying. They should have bit the bullet and raised several hundred million dollars to shore up the balance sheet.
# Bonus Content
I put some bonus content in the article that's behind a paywall. To follow the spirit of this sub, I'll tell you exactly what's in it.
>For anyone that’s currently holding the stock or any prospectors out there, you might be asking whether the current price ($0.85 per share & $150M market cap or so) represents an attractive entry price.
>Honestly, I’m not sure right now.
>Their technology stack actually does seem promising. They and Joby are the only eVTOL companies flying transition flights right now.
>But I’d have to dig in a lot more into their liability commitments that they have with Mudrick Capital, who seem to have sunk their teeth in with very favorable terms. The last time I looked, I think a good portion of the financing agreements between the two were redacted, but I honestly haven’t dug much into it at all yet.
>This company would be much more interesting to me if they didn’t have all the exotic liabilities hanging over their head - warrants, preferred, debt, convertibles, tranches. I’m not even exactly sure where public equity holders stand in the capital structure (I assume close to the bottom).
>But they may be a reasonable takeover target. I could see an investor taking Vertical private, putting a billion on the balance sheet, and then relisting in a few years after they’ve made more progress and risk-on stocks are back on the menu. But outside interest would also be dependent on the ability to get out of commitments with Mudrick Capital, who are already in a deep hole on their investment and probably have to fight their own sunk cost issues while holding the bulk of the voting rights.
>It might be worth it, but I’d honestly rather buy more Joby right here. No one remembers the 3rd ride-share company after Uber and Lyft.
>One thing is certain. Management should have gotten way ahead on financing. It was too early in development to do all the debt and preferred financing that they attempted. Current owners would have been better off with dilution - which is it’s own lesson that points back to the work that I’ve done previously. Dilution isn’t a scary beast, but part of the development lifecycle for these early stage companies. As long as you account for it in your analysis, embracing dilution events can give you a leg up on investors that easily get shaken out.