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Despite a bumpy history of these deals in the eVTOL space, a merger with a special purpose acquisition company (SPAC) is the way in which AIRO Group (parent company of eVTOL firm, Jaunt Air Mobility) will go public. The deal will be completed over the next three months.
SPACs, also called “blank check companies,” are publicly-traded shell companies that enable private companies to become publicly traded after the merger is complete. In this case, AIRO is merging with a SPAC called Kernel Group Holdings.
The move has surprised some in the eVTOL space — and is being watched closely — because some of the past SPAC mergers in the sector have gone less than well, or weren’t followed through with after announcement.
Also that year, Volocopter canceled its planned SPAC merger, reportedly telling investors it was abandoning the idea due to the “extremely unfavorable” environment for SPAC transactions at the time.
Some in the industry have also noted the market for SPACs has soured due to regulatory crackdowns by the U.S. Securities and Exchange Commission. Overall, this approach to going public and raising cash continues to draw attention.
When Joby, Lilium, Archer and Vertical Aerospace went public via SPACs, none of them saw the influx of cash they were hoping for because of mass stock redemptions.
Is Jaunt concerned about mass stock redemptions in its planned merger? Here are some thoughts from Martin Peryea, executive vice president and general manager of electric air mobility at the AIRO Group.
Peryea explained that Kernel signed a forward purchase agreement, commonly known as a backstop agreement, with Meteora, which includes Meteora Special Opportunity Fund I, Meteora Select Trading Opportunities Master and Meteora Capital Partners.
That is, Meteora has agreed to purchase up to 7.7 million shares of Kernel Class A common stock, including shares of common stock of the combined company in the open market. This purchase, Peryea said, also includes “other Kernel stockholders who may otherwise elect to redeem their shares.”
He added that “Kernel and AIRO also anticipate bringing in additional institutional and strategic investors in connection with closing of the business combination.”
The topic of how much cash Jaunt will receive from the merger is one that many industry members such as Whisper Aero Mark Moore are curious about. “The Jaunt concept deserves to be funded, and funding has been the only thing holding it back from being a great eVTOL development activity,” he commented on LinkedIn.
While Jaunt cannot legally comment on how much money it will receive from the merger, Peryea can provide some insight into its current funding, but did not share how much money is needed to take Jaunt to its next stage of development.
“We are currently privately funded and The AIRO Group has funds for ongoing operations,” he said. “Jaunt is currently executing an Air Force contract that is maturing the enabling technologies required for the Jaunt Journey. We are refining our business and financial plans in concert with Kernel.”
Why a SPAC?
The question of why AIRO chose to go public with a SPAC is not disclosable, but can be speculated upon.
First, let’s take a quick look at some of the use of SPACs and other methods of raising cash in the eVTOL space and some related sub-sectors. In addition to the firms mentioned above such as Joby, both Blade Air Mobility and Eve Air Mobility used SPACs in 2021 and 2022.
Outside of eVTOL but still within the aircraft and electric vehicle sectors, Wheels Up Experience also went public with a SPAC in 2021. However, wanting cash to integrate electric aircraft into the fleets of its partner operators, Surf Air Mobility decided in late 2022 against a SPAC and decided to go public on its own.
In February 2023, startup small jet operator Verijet also veered away from SPAC plans and announced it would aim for private equity investment instead. Two months ago in April 2023, another private jet service, Flexjet, backed out of plans for a SPCA merger that was announced last fall, but that month, yet another jet service, FlyExclusive, announced it would proceed with a SPAC merger.
Just in May 2023, as Vietnam-based Vinfast overhauls operations to manufacture electric SUVs, it announced a SPAC merger with the aim of attaining a U.S. public stock listing “without the need to simultaneously raise substantial amounts of capital from investors.”
Circling back to why a firm like AIRO might choose the SPAC pathway at this point, Sergio Cecutta at Arizona-based SMG Consulting said the terms received from the SPAC firm might play a factor.
These deals can also provide faster speed to get the cash needed to achieve regulatory approval. “Obviously, the longer it takes a company to raise cash, the more delayed its journey to commercializing an aircraft,” he said.
Cecutta added that “in this case, AIRO is a revenue-generating business, quite different from some of the other OEMs [original equipment manufacturers] that have done a SPAC merger, and this might result in a lower redemption rate than the other latest SPACs.”
For his part, Peryea stated that “based on the market cap of companies such as Joby, AeroVironment, and Eve Air Mobility, AIRO is fairly valued, providing a significant discount to the investor and increased security as the company covers the broader aerospace and defense market.”
Jaunt’s launch plans
As Peryea stated in December, the Jaunt Journey, with its patented slowed rotor compound (SRC) technology, will be certified as a rotorcraft. Jaunt is anticipating type certification in 2027.
“The powered lift does not impact Jaunt in certifying as a rotorcraft, as Parts 27 and 29 already address vertical takeoff and landing requirements,” he stated. “Regarding safety, Jaunt’s proprietary SRC technology allows the aircraft to land via autorotation or by gliding in a controlled fashion should there be an unexpected total loss of propulsion. The pilot … will be able to choose a safe landing spot and have complete control of the aircraft during descent. No ballistic parachute is required.”
Jaunt will target five market segments: short-range (urban) and long-range (regional) flights, middle-mile cargo transport, emergency response and other existing operations that currently involve helicopters.
Jaunt has already established customers in these markets and has signed non-binding letters of intent (LOI) for the purchase of several hundred aircraft with existing and new Part 135 operators who currently have a mixed fleet of rotorcraft.
“Jaunt will provide life cycle support for these aircraft,” Peryea said, “and we are working closely with CAE to provide ground base flight training.”
Geographically, Jaunt’s market is global, he added. “Jaunt has customers in North America, Central America, South America, Europe and Asia. Our goal is to work closely with each customer as their market develops. The initial emerging markets in AAM [advanced air mobility] are short-range passenger/cargo UAM [urban air mobility] in Latin America and Asia-Pacific.”
This year, Jaunt signed a memorandum of understanding with Blade India to launch eVTOL operations in India by 2027. Blade India will purchase 150 Jaunt Journeys, with an option to order another 100.
Jaunt has also signed an LOI with Redwings to launch an air taxi service in various urban markets, beginning with Mexico City. Jaunt asserts that because its rotor technology has low-rotor disc loading and tip speeds, the Jaunt Journey will provide Redwings with highly efficient vertical flight at that high altitude — over 7,300 feet (2,225 meters).
Also, to assist implementation of AAM and customer integration of the Jaunt Journey, Jaunt has formed an alliance of experts called Access Skyways to develop ecosystems within the purview of operators, identified airports, existing heliports, and related transportation systems withing a given geographic region.
“The alliance offers expertise to stakeholders related to the implementation of these systems, as well as public education,” Peryea said. “Services include architecture and engineering, battery technology and system electrification, aircraft fleet and network optimization, airport operations and construction.”