Undaunted by ongoing litigation with Wisk Aero, the eVTOL developer Archer Aviation is pushing ahead with plans to go public through a merger with Atlas Crest Investment Corp. (NYSE: ACIC).
The special purpose acquisition company (SPAC) announced this week that its shareholders will vote to approve the business combination with Archer on Sept. 14 — potentially making Archer the third electric air taxi developer to begin public trading in the space of just over a month. Following its own SPAC merger, Joby Aviation listed on the New York Stock Exchange on Aug. 11, and shareholders of Qell Acquisition Corp. are scheduled to vote on a combination with Lilium on Sept. 10.
Archer was the first eVTOL developer to join the SPAC craze, announcing its plans to combine with Atlas Crest in early February this year. But the company has been saddled with an ongoing lawsuit brought by Wisk, which has accused Archer of stealing the design for its Maker eVTOL and other valuable trade secrets.
Last month, Archer prevailed in the first round of the dispute, when a federal judge denied Wisk’s motion for a preliminary injunction that would have brought Archer’s development work to a standstill. Archer has filed a counterclaim against Wisk, accusing the Boeing-Kitty Hawk joint venture of deploying a “knowingly false extra-judicial smear campaign” against Archer that has damaged its business prospects at “a critical juncture for the company.”
An Archer spokesperson told eVTOL.com that even if Wisk drops its claims, Archer will continue to seek damages from its rival. “We believe we can prove more than $1 billion in damages in this counterclaim and we will seek full relief,” the spokesperson said.
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In advance of their planned combination, Archer and Atlas Crest recently slashed Archer’s pre-money valuation from $2.7 billion down to $1.7 billion, although the move also acknowledged a general cooling of investors toward speculative tech stocks that is not limited to Archer. The merger stands to generate $1.1 billion in gross proceeds for Archer, including a fully committed $600 million private investment in public equity (PIPE) and $500 million from Atlas Crest’s cash held in trust.
However, mass redemptions — in which large numbers of SPAC shareholders choose to redeem their shares rather than remain invested in the combined company — have become increasingly common in these types of mergers. When Reinvent Technology Partners shareholders voted to approve that SPAC’s combination with Joby, they redeemed around 63% of their shares, leaving Joby with just 37% of Reinvent’s cash held in trust (although still a substantial haul thanks to a healthy $835 million PIPE).
Archer and Atlas Crest are betting that a lower valuation will help stem shareholder redemptions, leaving Archer with more cash to achieve the daunting task of certifying a novel electric aircraft. Even with mass redemptions, Archer’s $600 million PIPE would make it one of the best funded eVTOL developers at present, although still short of the over $1 billion that some estimate it will take to bring a commercial air taxi to market.
In anticipation of its merger, Archer has been growing its leadership team, recently hiring Ben Lu from Logitech as chief financial officer. The company has also made several high-profile nominations to its board of directors, including former United Airlines CEO Oscar Munoz as well as Deborah Diaz, previously NASA’s chief technology officer and deputy chief information officer; Maria Pinelli, who served as global vice chair for Ernst & Young; and former Mitsubishi Motors North America CEO Fred Diaz.