What happened
Shares of German aerospace start-up Lilium (LILM -1.98%) fell as much as 25% on Monday after the company was the subject of a new short report. Iceberg Research is raising questions about the company's prospects, and investors aren't sticking around to hear the answers. As of 10:46 a.m. ET, shares were down 24.66%.
So what
Lilium is one of a number of young companies developing electric airplanes capable of vertical takeoffs or landings, or eVTOLs, to hit public markets over the past year. There's a lot of excitement around eVTOLs as a green alternative to small-jet flying and as a version of the fabled flying car that could help alleviate traffic jams, but there's also a lot of competition.
Image source: Lilium.
In a report out Monday, Iceberg Research called Lilium "the losing horse in the eVTOL race." The report notes that although Lilium hopes its jet will fly up to 155 miles, so far after seven years of work, no Lilium demonstration flight has lasted more than three minutes. The report questions whether Lilium's model will have enough battery life for sustained flight, and it notes Lilium only has about 18 months worth of cash at current burn rate.
Iceberg compares Lilium to another start-up, Joby Aviation, which has demonstrated the ability to fly 150 miles on its current model. Both Joby and Lilium hope to have a plane ready for commercial flight in 2023, but Iceberg notes that, while Joby has completed about 1,000 test flights to date, Lilium has done fewer than 50.
Lilium shares were likely to be under pressure today even without the short report. The company, which went public last September via a merger with a special purpose acquisition company (SPAC), had a 180-day lockup period on a significant portion of its shares. Iceberg estimates that about 177 million Lilium shares, or about 68% of the company's total outstanding shares, are available for trading as of today.
Now what
For all the promise of eVTOLs, Lilium is just one player in a very crowded field. There are at least four eVTOL start-ups that have gone public since the beginning of 2021 via SPACs, and there are about three dozen companies chasing the opportunity globally.
It seems likely there will be a shakeout that leaves us with winners and losers, and although it is too soon to say for sure who those winners and losers will be, Lilium does seem to be trailing the likes of Joby in bringing its offering to market.
Lilium, which at one point after going public was valued by the market at more than $2 billion, has seen its stock fall 70% since it began trading. Given the risks, and the uncertain future for the company, investors would be wise to carefully consider the Iceberg report when considering whether to buy this dip.
