What happened
Chinese autonomous aircraft company EHang (EH 0.28%) is getting funding from a high-profile Asian entertainment executive. Investors are climbing on board, sending shares of EHang up as much as 28% in Wednesday trading.
So what
EHang is an aerospace company focused on autonomous aerial vehicles, including some big enough to transport passengers around cities. It is one of several so-called "flying taxi" start-ups competing for investor attention, but the company has made progress working toward regulatory certification in China and has been running trials of its passenger craft.
Among those intrigued by the opportunity is Lee Soo Man, a South Korean music producer and founder of media company SM Entertainment.
Late Monday after U.S. markets closed, EHang announced it has entered into a $23 million private placement with several strategic investors, including Lee. The company will receive a deposit of 80% of the aggregate purchase price for the proposed placement from the investors, with the deal expected to close in the third quarter.
EHang said the funds will be used for working capital and general corporate purposes. While the added funds can't hurt, the celebrity endorsement appears to be what is really driving the shares higher.
In a statement, Lee said, "I appreciate EHang's unwavering dedication to enabling safe, autonomous and eco-friendly air mobility for the general public, as the first mover and a leading innovator in the emerging [urban air mobility] industry with great potential."
Lee said, "I look forward to the convergence of cutting-edge transportation technologies and popular culture to create sustainable value, and I'm proud to be part of it."
Now what
Lee has shown an interest in drone technology before, previously setting up LeePollux to explore using drones in visual entertainment productions. Although he is no longer with the company he founded, he remains a big name in K-pop with the ability to drive attention, and potential customers, to EHang.
Investors need to understand that this is still emerging technology, and although EHang is generating revenue it is priced at more than 120 times sales. There is a lot that can go wrong from here, and a lot of potential future growth already priced into the shares.
But for those intrigued by the technology, and able to stomach some risk, EHang just got a major partner to help it in its pursuit. Investors are understandably excited about this latest update.
