Don’t look SPAC in anger

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Last week was an exciting one on the New York Stock Exchange. On Monday Eve, Embraer’s electric vertical aircraft merged with Kenn Ricci’s Zanite Special Purpose Acquisition Company (SPAC). The merger leaves Eve with $357m to develop its new aircraft.

“To get any deal closed in historically challenging equity markets is a great achievement,” David Fowkes, MD and head of the Aviation and Aerospace Team at Raymond James, one of Embraer’s advisers, told Corporate Jet Investor. “It is testament to who the Eve team are and what they have achieved so far. The same is also true about the Zanite team – these are real operators who have run real businesses and created huge amounts of value.”

Eve is now the fifth eVTOL company to list. All of them have seen big falls in the share price since merging on to the exchange. But so have many companies in other industries that have merged with SPACs. “There are a lot of technical headwinds for SPACs with issues like redemptions and warrants,” says Fowkes.

SPAC mergers have fallen sharply across all industries as finding PIPE (Private investment in public equity) investors has got harder. Embraer and Zanite chose to target strategic investors rather than private equity or hedge funds. Eve’s $357m PIPE included $185m from Embraer, $147m from investors including: Acciona, Azorra Aviation, BAE Systems, Bradesco BBI, Falko Regional Aircraft, Republic Airways, Rolls-Royce, SkyWest, Space Florida and Thales USA. Zanite’s sponsor also put in $25m.

Eve listed the day before the US Federal Aviation Administration announced that it was changing its approach to certifying electric vertical aircraft. EVTOL manufacturers had been expecting to need to meet the FAA’s small airplane certification rules, now they will have to meet the powered lift category used by tiltrotors.

This change is likely to have a limited effect on Eve. One of key strengths is Embraer’s experience with getting aircraft approved by Brazilian regulator ANAC, the FAA and Europe’s EASA.

On Thursday Wheels Up – which merged with a SPAC in July 2021 – announced its first quarter of 2022 results. Sales rose 24% year-over-year to $325.6m (with active members up 26%). But the net loss also rose $56.8m to $89m. Wheels Up made an adjusted loss of $49.4m.

Wheels Up is not having any issues with demand but is struggling with supply. It says that it is starting to solve this problem. “Over the past several months, we have made meaningful improvements to address operational challenges and expect to realise the benefit in the coming quarters,” said Kenny Dichter, Wheels Up chairman and CEO in a statement. “We are ahead of plan on pilot hiring and continue to add to our maintenance capabilities while also delivering on several key strategic and technology initiatives.”

Despite rumours, Thomas Flohr, founder of Vista Group, says that he has no interest in joining Ricci and Dichter on the New York Stock Exchange. “I am not selling,” he tells Corporate Jet Investor. “We met with various investment banks in the summer of 2021 and they proposed various deals. I looked at them and am not interested. I do not want to sell. We are happy to be private and I love what I am doing.”

 

Pictured: Eve’s eVTOL.

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