Pure Play Urban Air Mobility Company Stocks Lost Over $16 Billion In 2021

In recent months, I have been closing the loop on alternatives to jet fuels over the coming decades, and where and how the replacement will begin. My assessment of hydrogen and aluminum fuel cells and the arguments of those critical of rechargeable batteries and biofuels point to rechargeable batteries and biofuels as the dominant alternatives. Then it projected fuel substitution to 2100 in a thought-provoking scenario, showing battery and biofuels rising through 2060 followed by batteries dominating, and projected emissions benefits.

My extended conversation with Anders Forslund, CEO and founder of Heart Aerospace, presented me with an opportunity for regional air mobility using the economics of fixed-wing aircraft to revitalize the sector, something that was reinforced by conversations with Joseph Morris, CEO and founder of Electron Aviation, and the White Paper on Regional Air Mobility for NASA.

This led me to explore high-market pure toy companies trying to introduce electric vertical take-off and landing (eVTOL) aircraft, including Joby, Archer, Ehang, Vertical and Lilium, all of which I’ve looked at in the past as a snooper on interesting electrification opportunities without particularly thinking in that they are related. It became clear that they would be much more expensive to operate than claimed, that their total market to address was small, that they were betting on complexity rather than simplicity, and they were betting on battery power density.

I was surprised by the market capitalization of the leaders in this field. Except for Blade Urban Mobility, a platform that provides the wealthy with charter planes and operates a scheduled helicopter service in Manhattan, it is one of only two in North America, with the exception of aviation giants such as Embraer, Airbus and Bell (Textron), which has eVTOL aircraft in its prototype, Including Vertical’s reported $2.2 billion, which is theoretically still pending this year, the market capitalization recently remains more than $12 billion.

It was clear to me that this space was pretty much overvalued in that market capitalization, but I thought it would be interesting to see what the pure market capitalization of the toy market was at its peak versus today.

At its peak in 2021, the stock, including Vertical’s SPAC, was valued at $27.92 billion. As of North American markets close on November 23, 2021, it’s worth $11.82 billion, if Vertical’s $2.2 billion is in place, which is a bad assumption. If SPAC goes ahead, I expect it to be less than $1 billion.

That doesn’t make Cathie Wood’s Ark Invest ARKX ETF, which launched on April Fools’ Day 2021, amusing enough, with its location in Pure Play and Blade, as well as autonomous weapons platforms, drones, and military-industrial stocks, all seem so prescient. It’s fared much better than pure plays, down just 5% since its inception, in part because it only had $40 million of the $540 million in urban air travel space the last time it came through, so it did. Other stocks offset the eVTOL stock.

It appears that $16.1 billion of market value has evaporated to urban air transport stocks in the past few months.

By comparison, the S&P 500 is up 24.88% YTD, the Dow Jones Industrial Average is up 17.01% YTD, the NASDAQ Composite is up 22.4%, and the TSLA, with its electric vehicles and standalone features, is up 57.16%.

I suppose most of the people and organizations that created the SPACs that acquired eVTOL companies got their money back early on, so they did a good job, and the companies themselves still had a lot more capital than they needed, certainly a lot more than their products and business models would suggest. remotely justified. But a lot of investors who didn’t do their due diligence, and who didn’t remember the warning factor, undoubtedly lost a lot of money in this area in the past 10 months. If they had just invested in a market index fund, they would have been far ahead.

So yeah, the whiff of tulips I’d been smelling during my analysis of this space became overwhelming. It’s been a bubble, deflated significantly, and has no basis for re-inflation, but the pure toy companies still have plenty of money and individual support from NASA to lobby for urban ports and the future of Blade Runner. Never underestimate the power of billions of dollars to make a lot of people act stupid, so expect a city or two to buy up the idea and spend money that could have been better spent on behalf of its citizens.

Meanwhile, city scientists, policy makers, and investors focus your attention on the part of aviation electrification that has tremendous meaning and powerful use cases and will in fact deliver innovative value: regional air management. Revitalize the 400-750 meter airstrips in and around your city with an interwoven network of carbon-neutral, quiet and viable cargo and passenger cargo this decade. Pay attention to Heart Aerospace, Eviation and Electron Aviation, with a cargo capacity of 4 to 19 passengers, 0.5 to 2.5 tons. Pay attention to requests from cargo carriers and passenger airlines for fixed-wing airlines that will revitalize existing airstrips. Support Harbor Air as it converts its passenger floatplanes into electric planes.

The innovator’s dilemma tells us that major airlines will be slow to generate electricity, slow to bring useful electric goods and passenger aircraft to market, and slow to realize that they are losing market share at the bottom of the market. Let them find out. Christensen and Raynor gave them the ideas they needed to survive the transformation in 1997, so if they can’t figure it out, that’s about them.

Aviation will go electric for the next 80 years. It will go through the flash of biofuels that will have much lower emissions than today’s fossil fuels. Electricity will start with small fixed-wing aircraft that fly 400-600 km between urban areas, and they will have business models with on-demand booking service, flight service when you arrive, and a set of scheduled services.

Flying won’t be electric starting with the massive numbers of electric VTOLs and likely won’t end up in the skies of our cities. If you are an urban planner or policy maker involved in urban air mobility, be aware that boom is off this flower, cut your losses, and focus on regional air mobility. If you are an investor in one of the pure plays, the stock trajectory is down. Minimize your losses. If you work for a company, congratulations, you have ridiculous amounts of money to play with on great engineering projects. But if you really want to make a difference to the climate or the economy, consider your exit strategy.

Main image courtesy of Electron for Aviation.

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