Why did Lilium’s stock crash 61% — is there hope left for flying taxis?

Shares of Lilium, the electric vertical take-off and landing (eVTOL) vehicle manufacturer, plunged by more than 61% on Thursday after the company announced in a regulatory filing that its two main subsidiaries would likely file for insolvency in the coming days.

The dramatic drop in stock price comes as the aerospace startup faces a severe financial crunch, unable to secure the state guarantees it desperately sought from the German government.

In a regulatory filing with US authorities, Lilium, which is listed on the Nasdaq, revealed that it had been unable to secure enough additional funding to maintain operations at its two main subsidiaries, Lilium GmbH and Lilium eAircraft GmbH.

As a consequence, the management of these subsidiaries concluded that they are “overindebted” and will soon be unable to meet their financial obligations.

“The management of the Subsidiaries has informed the Company that they have to file for insolvency under German law and in doing so will apply for self-administration proceedings in Germany,” the company said in the filing.

After filing for insolvency, the subsidiaries will not be required to repay any debts incurred before the application, Lilium noted, and creditors will generally be “prohibited from foreclosing against the companies on any claims they may have.”

The planned insolvency filings by the subsidiaries could lead to Lilium’s delisting from the Nasdaq Global Select Market or suspension of its shares.

German government refuses loan to company

The company had requested €50 million from the German federal government to remain solvent.

However, the budget committee of the Bundestag declined the request, leaving Lilium scrambling to find alternative funding sources.

In a statement released last week, Lilium confirmed that it “received an indication that the budget committee of the parliament of the Federal Republic of Germany will not approve a €50 million guarantee.”

The proposed loan would have been provided by KfW, and the rejection left the company in a precarious financial position.

The German government’s refusal to support Lilium has sparked criticism from some industry voices.

Bavaria’s economy minister, Hubert Aiwanger, described the decision as “regrettable,” emphasizing the importance of supporting innovative industries like electric aviation.

Danijel Višević, co-founder of climate technology investors World Fund, expressed his disappointment, suggesting that the German government’s stance reflects a narrow view of eVTOL vehicles.

Višević argued that lawmakers incorrectly see air taxis as a luxury product for the wealthy when in reality, they represent a crucial step in the transition to zero-emission transportation.

The fall of Europe’s flying car hope

Lilium’s current struggles mark a dramatic fall from grace for a company once hailed as Europe’s most promising player in the future of air mobility.

The startup, founded in 2015, aimed to revolutionize short-distance travel with zero-emission electric aircraft designed to operate like flying taxis.

The concept of eVTOL vehicles captured imaginations worldwide, with Lilium attracting early support from notable investors such as Atomico, Earlybird, and Chinese tech giant Tencent.

In 2021, Lilium capitalized on the Special Purpose Acquisition Company (SPAC) boom and went public on the Nasdaq through a merger with Qell Acquisition Corp.

At the time of its listing, Lilium projected aggressive growth, including €240 million in revenue by the end of 2024 and profitability by 2025.

However, since its IPO, Lilium’s share price has plummeted by more than 95%, and the company has struggled to meet its ambitious milestones.

Lilium’s jets can cost as much as $9 million. The company also had a six-seater version in development, which would have set a buyer back about $7 million.

Lilium’s challenges are not unique. The eVTOL industry, while promising, has proven financially demanding, and many competitors have also faced difficulties.

Volocopter, another German electric aviation startup, was on the verge of insolvency earlier this year and had sought similar state guarantees from two German states and the federal government.

While Volocopter has secured new funding, it too remains in a vulnerable position.

In the US, eVTOL companies have fared slightly better, with Joby Aviation receiving $600 million in state support from the American government.

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