What happened

Aerospace start-up Archer Aviation (ACHR -1.01%) announced a new collaboration deal with Boeing (BA -1.84%) and $215 million in new funding. Investors were initially excited, sending Archer shares up 19% at the open Friday. But as the day went on, the stock has given up those gains, perhaps because investors are digesting the details of the deals.

So what

Archer is one of several companies developing electric airplanes capable of vertical takeoffs and landings, or eVTOLs. Advocates envision these so-called flying taxis flying over city traffic jams or connecting city airports to nearby suburbs.

This is still experimental tech, and a race is on between Archer and rivals including Joby Aviation, Lilium, and Vertical Aerospace to get their designs certified and in the air.

Late Thursday, Archer announced an important milestone in its effort. The company's Midnight aircraft received its Special Airworthiness Certificate from the Federal Aviation Administration (FAA), indicating Midnight has met all safety requirements and is allowed to begin flight testing.

Archer also announced it has secured fresh funding from a group that includes previous investors Stellantis and United Airlines Holdings, Boeing, and Ark Investment Management. The investment includes an acceleration of $70 million from Stellantis from an agreement reached earlier this year.

As part of its deal with Boeing, Archer announced it had settled litigation between it and Boeing's Wisk Aviation subsidiary. With the settlement, Archer will source autonomous flight technology from Wisk.

Archer also said it was on track to meet the obligations of its previously announced $142 million deal with the Department of Defense to deliver the Midnight by the end of this year or early next year, which the company believes would make Midnight the first-ever eVTOL aircraft delivered to a customer.

Now what

At first glance, the announcements all appear positive. So why the up-and-down stock reaction? It is hard to know for sure, but there are a few theories worth mentioning.

For one, Archer shares have arguably gotten ahead of themselves thanks to the excitement from a steady stream of press releases out from the company. Archer shares are up 200% year to date.

Second, the Boeing agreement would appear to be Archer conceding on at least some of the points Boeing made in its litigation, and locks Archer in as a Boeing customer. Terms of the agreement provide Wisk with warrants to purchase 13.2 million shares of Archer stock at $0.01 per share, with one-third of that total vesting immediately and the remainder in six months. If Archer's value drops, the company could owe Boeing cash instead.

Finally, while Archer is indeed making progress, it has not jumped into a significant lead. Rival Joby received its FAA clearance for flight testing back in June and has its own $131 million deal with the Air Force. Joby also intends to deliver an aircraft early next year.

At best, Archer and Joby have emerged as the front-runners at the midpoint of what is a marathon aerospace competition. There's reason for optimism, but given the risks and uncertainty that come with new aircraft platforms and the expectations now built into the share price, it is no surprise that investors had a sober response to these latest developments.