What happened

Shares of San Jose-based flying taxi company Archer Aviation (ACHR 9.03%) took off Wednesday morning, rising 14% through 1:15 p.m. ET -- and they're not looking back. It's no great mystery why.

This morning, in an SC 13D/A filing with the Securities and Exchange Commission (SEC), Archer revealed that automobile company Stellantis (STLA 0.86%), maker of Dodge Ram trucks and Jeep SUVs, has taken a 10.6% stake in the maker and operator of electric vertical take-off and landing (eVTOL) aircraft.  

So what

According to the filing, Stellantis paid $25 million to acquire 6.3 million shares of Archer Aviation stock at an average price of $3.94 per share. Far from selling its shares at a loss in order to grab cash, therefore, it appears Archer was able to convince Stellantis to pay a premium -- last night, Archer shares closed at just $3.39 per share.

Nor was this Stellantis' first purchase of Archer stock. Turns out, this latest purchase (amounting to 3.4% of shares outstanding) lifted Stellantis's stake in the company to 10.6%. What's more, additional information in the filing appears to imply that Stellantis is intending to grow its stake, eventually, to as much as 12.5% of Archer's shares outstanding.

Now what

Investors are obviously thrilled at Stellantis' support. Although Archer had $445 million in cash to its credit at last report, data from S&P Global Market Intelligence show that this cash hoard is dwindling at an alarming -- and accelerating -- rate as Archer moves toward production at scale. Two years ago, Archer's balance sheet showed $746.6 million. But while that appears to suggest a cash burn rate of only about $150 million a year, in fact, the company's latest financials reveal that over the last 12 months Archer burned through $245 million in cash.

The fact that Stellantis is willing to keep pouring money into the stock, therefore, comes as a big vote of confidence.

That being said, it's perhaps not as big a vote of confidence as investors think. In contrast to Archer, you see, Stellantis is practically overflowing with cash -- $52.6 billion worth in fact. Against that backdrop, a $25 million investment in Archer really amounts to little more than pocket change for Stellantis, albeit pocket change that could deliver a very big potential reward if the investment pays off, Archer dominates the air taxi market, and Stellantis ends up owning 10% of it.