What happened
Electric aircraft manufacturer Lilium (LILM -0.31%) had one of its best days in its brief history as a public company, with shares trading up as much as 30% despite little firm news about the company. It appears some combination of market chatter and a potential short squeeze is helping the stock regain some of its altitude.
So what
Lilium is a German aerospace start-up that is developing electric airplanes capable of vertical takeoffs or landings, known in the industry as an eVOTL. There is great potential for these vehicles, but also a lot of competition.
Image source: Lilium.
Lilium shares plunged earlier this month after the company was the target of a short report that claimed Lilium is "the losing horse in the eVTOL race." The report, from Iceberg Research, says Lilium is well behind rivals including Joby Aviation in terms of getting its aircraft certificated and ready for use.
The company went public last September via a merger with a special purpose acquisition company (SPAC). Even before the short report, investors had been bracing for a potential flood of new shares on the market as post-merger lockups were released.
But on Thursday, momentum turned in Lilium's favor. The stock potentially got a boost from an unsubstantiated rumor floated on stock discussion boards and on Twitter that automaker Tesla is interested in investing in or buying Lilium. While there is nothing to suggest that there is any truth to this rumor, given Lilium's volatility and the recent report by Iceberg there was likely a lot of downward pressure and high short interest in the stock heading into Thursday trading.
Now what
It's impossible to know if there is any truth to the deal talk, so for now at least investors should take that with a grain of salt. The underlying business remains one with potential, but a lot of risk. As Iceberg notes, Lilium is likely to be hard-pressed to meet its internal deadline to get its aircraft into commercial operation by next year, and there are as many as three dozen other companies worldwide working on some form of an eVOTL.
Lilium shares have made back most of what was lost the day the short report was released, but the stock is still down nearly 60% since its public debut. Given the uncertainty, investors would be wise not to be in a hurry to chase Thursday's rally.
