Vertical Aerospace Seeks New Funding Through Share Capital

Vertical Aerospace will seek new investments later this year to make sure that it is adequately funded to meet its objectives for 2024 and beyond. The Advanced Air Mobility (AAM) start-up says existing funding is sufficient for 2023 and 2024, as it has a net cash position of almost £123 million last December. But it likes to have a more robust position, Vertical says in its shareholder letter and annual report that were released this week. Vertical Aerospace seeks new funding through additional share capital. “We expect our investment in the 12 months following the date of this letter to be approximately £90 million, which will be used primarily to fund the creation and testing of the prototype aircraft, support the certification process and invest in additional personnel across both engineering and support function,” Chief Financial Officer John Martin says in the shareholder letter. Hence the need for more funding, Vertical says in the 2022 annual report: “We expect to issue additional share capital in the future (including through our Equity Subscription Line) that will result in dilution to all other shareholders. We have granted, and expect we will continue to grant equity awards to employees and directors under our equity incentive plans. We may also raise capital through equity financings in the future. As part of our business strategy, we may make or receive investments in companies, solutions or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional share capital may cause shareholders to experience significant dilution of their ownership interests and the per share value of our ordinary shares to decline.” The report adds: “There can be no assurance that we will be able to obtain additional funding on acceptable terms and thus have sufficient funds to meet our funding requirements. As a result, the timely completion of financing is important for our ability to continue as a going concern when we have exhausted our existing resources.” Vertical Aerospace is owned 70.3 percent by CEO Stephen Fitzpatrick, with Mudrick Capital Management the second-biggest shareholder with 10 percent, and American Airlines third with 5.3 percent. Former Avolon CEO Dohmnal Slattery and Vertical’s chairman of the board has a 1.5 percent stake. Lower net loss for 2022 The UK company reported a £-94.4 million net loss for 2022, an improvement over £-245.2 million in 2021. There were no revenues whereas research and testing expenses rose to £49.1 million from £24.3 million. Administrative expenses are down by a factor of five to £54.8 million, but this is because of a share-based payment that was incurred in 2021. The operating loss was reduced to £-98.1 million from £-277.2 million in the previous year. Vertical received $94 million in proceeds from a PIPE Investment and $192 million from Convertible Senior Secured Notes, “which consummated substantially simultaneously with the Business Combination, net of transaction costs.” PIPE investors include Fitzpatrick, American, Avolon, and a sponsor. Vertical has received over 1.400 orders and pre-orders for the VX-4 from customers like American Airlines, Avolon, Bristow, Iberojet, Virgin Atlantic, and Marubeni. American Airlines and Marubeni have made pre-delivery payments to secure initial delivery slots. American made its payment in July for fifty VX-4s out of a pre-order for 250 aircraft plus 100 options while Marubeni paid in January for 25 of 200 aircraft. The contract with American is still a Memorandum of Understanding. It was extended last year but is due at the end of October. “In 2022, we extended and amended our memorandum of understanding with American Airlines, pursuant to which we agreed to enter into a master purchase agreement that will contain the final terms for the purchase of our aircraft (the “AA Master Purchase Agreement”) by October 31, 2023, and American Airlines committed to pay a pre-delivery payment (the “Pre-Delivery Payment”) upon the satisfaction of certain conditions.” About other pre-orders, the annual report says: “The obligations of each of Avolon, American Airlines, Bristow, Iberojet, Marubeni, Virgin Atlantic, and FLYINGGROUP to consummate the order will arise only after all of such material terms are agreed in the discretion of each party. As a result, there can be no assurance that Avolon, American Airlines, Bristow, Iberojet, Marubeni, Virgin Atlantic, and/or FLYINGGROUP will place a sufficient number of orders if any at all.” This makes the financial position of Vertical – or that of any other AAM start-up – a chicken and egg situation, as Vertical confirms in its report: “Until we generate sufficient operating cash flow to cover our operating expenses, working capital needs and planned capital expenditures, or if circumstances evolve differently than anticipated, we expect to utilize a combination of available pre-delivery payments, government funding, plus equity and debt financing, to fund any future capital needs.” Testing and certification It comes all down to demonstrating that the VX-4 is performing well and that certification is going to plan. Vertical says it has made good progress in both areas last year. The first production full-scale prototype was built, which started its first flight tests after the UK’s Civil Aviation Authority (CAA) granted Vertical the Permit to Fly. Initial tests at Vertical’s Cotswold Airport facility have only been tethered tests, initially just five feet above the ground. The next step this year is to start low-speed flight tests at up to fifty feet altitude and at forty knots to test multiple-axis maneuvers to expand the flight envelope. Once successfully completed, the VX-4 will start the crucial transition tests in which it goes from hover the horizontal flight at between 5.000 and 10.000 feet at 145 knots. At this stage, the flight envelope will be fully expanded and the aircraft will demonstrate that the aerodynamics, structure, powertrain, and flight control systems are working as designed. Earlier this year, Vertical submitted its initial proposal “on which to build our certification basis to the CAA. This has been followed with productive feedback from the CAA, laying the foundation for the detailed technical discussions we will be having with them, in the coming months as we work towards agreement on all the activities and evidence needed to certify our eVTOL.” In the US, the FAA has formally accepted the validation application while discussions with regulators in Brazil and Japan continue. Vertical, Marubeni, and Japan Airlines are targeting the 2025 Osaka World Expo to start eVTOL operations, for which all parties are working closely together with regulators on the Osaka Roundtable. As part of this, Marubeni performed proof-of-concept trials with helicopters in Osaka in December and January. Vertical Aerospace recently opened its own Vertical Energy Center in Bristol, where it will do research on and produce its own batteries for use in the VX-4. Together with University College London, the center will research how to increase the core capability of the batteries and how they can be used for other applications once they aren’t fit enough for use on the eVTOL.

US Flight Planner - US DoT On-Time Data	Airbus vs Boeing - Official OEM Data
US Airline Schedule Performance - US DoT Data	Daily OEM Production & Deliveries -

Subscribe To Our Newsletter

Related News

Falcon 10X First Flight Breaks High-End Duopoly

KKR’s $1.4 Billion Bet Confirms PE’s Bet

A SAF plant opens in South Africa