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

Vertical Take-Off Air Taxis Are A Solution In Search Of A Problem (Part 2)

In recent months, I have closed the loop about aviation fuel replacements over the coming decades, and where and how the replacement will start. My assessment of hydrogen, aluminum fuel cells, the arguments of the critics of rechargeable batteries and biofuels pointed to rechargeable batteries and biofuels as the dominant substitutes. I then projected the fuel replacement up to 2100 in a scenario to set in motion thinking that showed battery and biofuels increasing through 2060 followed by dominant batteries and the expected emission benefits.

My extended interview with Anders Forslund, CEO and founder of Heart Aerospace, introduced me to the possibility of regional air mobility with electrically fixed flight economics to revitalize the sector, somewhat cemented by conversations with Josef Mouris, CEO and founder of Electron Aviation, and NASA’s regional white paper on air mobility.

This led me to explore pure play capital with high market capital, trying to introduce electric vertical takeoff and landing craft (eVTOL), including Joby, Archer, Ehang, Vertical and Lilium, which I had all watched in the past as a voyeur on interesting electrification possibilities without particularly thinking them relevant. It became clear that they would be much more expensive to operate than claimed that their overall addressable market was small, that they opted for complexity instead of simplicity, and they opted for battery energy density.

I had been amazed at the market value of the leaders in this field. Exclusive Blade Urban Mobility, a platform that provides wealthy people with charter flights and runs a scheduled helicopter service in Manhattan, one of only two in North America, and exclusive space giants such as Embraer, Airbus and Bell (Textron), all of which have eVTOL aircraft in prototype, and including Verticals announced SPAC of $ 2.2 billion, which is still theoretically awaiting this year, the market value recently was still over $ 12 billion.

It was clear to me that this space was greatly overestimated by that market value, but I thought it would be interesting to see what the pure market value was at the top compared to today.

At its peak in 2021, equities, including Verticals SPAC, were worth $ 27.92 billion. At the close of the North American markets on November 23, 2021, they are worth $ 11.82 billion, assuming Verticals $ 2.2 billion stands up, which is a bad assumption. If that SPAC goes forward, I would expect it to be below $ 1 billion.

This does not make Cathie Woods Ark Invest ARKX ETF, created on April 1, 2021, funny enough, with its position in two pure plays and Blade, as well as autonomous weapons platforms, UAVs and military industry stocks, to look so foresighted. It’s done much better than the pure spectacle, and it’s only been below 5% since the beginning, partly because it only had $ 40 million of its $ 540 million in the urban air mobility area last time I checked, so other stocks have offset the eVTOL stocks. .

It appears that $ 16.1 billion in market value has evaporated for urban air mobility stocks in the last few months.

In comparison, the S&P 500 has increased by 24.88% year-to-date, the Dow Jones Industrial Average has increased by 17.01% year-to-date, the NASDAQ composition has increased by 22.4%, and the TSLA with its electric vehicles and autonomous functions, has increased 57.16 per cent.

I assume that most of the people and organizations that created the SPACs that took the pure game of eVTOL companies got their money early, so they did fine, and the companies themselves still have far more capital than they need, and certainly far more than their products and business models suggest, is externally justified. But a lot of investors who did not do their due diligence and who did not remember caveat emptor have undoubtedly lost a lot of money in this area in the last 10 months. If they had just invested in a market index fund, they would have been far ahead.

So yes, the smell of tulips I had smelled over my analysis of this room has become overwhelming. It was a bubble, it has been emptied massively, it has no basis to inflate again, but the pure companies are still left with a lot of money and the strange support from NASA to lobby for urban vertiports and a Blade Runner future. Never underestimate the power of billions of dollars to make a lot of people behave stupidly, so expect one or two cities to buy into this idea and spend money that could have been spent much better for the benefit of their citizens.

Meanwhile, urban planners, policy makers and investors are focusing your attention on the part of aviation electrification that makes huge sense, has strong use cases and will actually deliver innovative value: regional air management. Activate the 400- to 750-meter-long runways sizzling in and around your cities with a mesh network of freight and passenger deliveries that are CO2-neutral, quiet and viable this decade. Pay attention to Heart Aerospace, Eviation and Electron Aviation with their 4- to 19-passenger, 0.5- to 2.5-ton load capacity. Pay attention to the orders placed by shipping companies and passenger airlines for fixed-wing airlines that will revitalize your existing runways. Support Harbor Air’s when converting their commuter aircraft to electric.

The innovator’s dilemma tells us that the big space companies will be slow to electrify, slow to bring useful electric cargo and passenger planes 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 insight they needed to survive the transition in 1997, so if they can not figure it out, it’s up to them.

Aviation will electrify over the next 80 years. It will go through a biofuel fuel that will have far lower emissions than today’s fossil fuels. Electrification begins with small fixed-wing aircraft flying 400-600 kilometers between urban areas, and they want business models with on-demand booking and fly-when-you-arrive service and a lot of scheduled services.

Aviation will not electrify beginning with and probably will not end with a massive number of electric VTOLs humming through the sky in our cities. If you are an urban planner or a political decision maker dealing with urban air mobility, be aware that flowering is clearly coming from this rose, reducing your losses, and turning to regional air mobility. If you are an investor in one of the pure plays, the price of the shares is down. Cut your losses. If you work for one of the companies, congratulations, you have absurd amounts to play for on cool engineering projects. But if you actually want to make a difference to the climate or the economy, consider your exit strategy.

Feature image lent by Electron Aviation.

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