The air taxi company Lilium is threatened with a “blue letter”: The US tech stock exchange Nasdaq is likely to inform the company from Wessling in Bavaria in the coming days that it is at risk to remain on the trading platform. The reason for this is the persistently low share price.
Lilium shares have been trading below the one dollar mark for the past 30 trading days. This is the period after which the US stock exchange usually sends companies a letter warning them that the requirements for a listing on the Nasdaq have not been met. So-called penny stocks are not tolerated for long.
If you want to stay in, you have to act. But it won’t be easy for the team around former Airbus manager Klaus Roewe, who has been Lilium’s CEO since August. Investors could buy a share certificate in the company for 54 cents on Wednesday evening. That’s almost 95 percent less than the IPO. And the trend has recently continued to point downwards.
There is a reason for the dwindling trust: Lilium has so far had neither income nor a certified aviator. The aim is to transport people from Munich to Nuremberg with seven-seater, electric passenger jets. However, hundreds of millions of dollars are still missing to build and launch the Lilium jet.
Money that is even harder to come by in the current market environment than it was two or three years ago, when there was a lot of hype about the electric high-flyers.
180 days to comply with Nasdaq requirements
Nevertheless, Lilium is optimistic. “We will monitor developments closely and – if necessary – take active measures to continue to meet the conditions for further listing in the future,” a company spokesman told Handelsblatt.
According to Nasdaq rules, the company has 180 days to prove itself. During this period, the company must have a closing price of more than one dollar for at least ten consecutive days. The Lilium spokesman pointed out that “under certain conditions, a further extension of 180 days is possible”. The chances of staying on the Nasdaq are rated as “very good” and the weak price as a “temporary phenomenon”, the company said.
“Our current share price does not reflect the fundamental value of our company, which has been caught up in a general market decline for stocks of development-stage growth companies,” the spokesman said.
In fact, tech values collapsed almost collectively a good year ago. While the Nasdaq 100, i.e. the share index for the hundred companies listed on the Nasdaq with the highest market capitalization (excluding financial companies), was still at almost 14,300 points at the end of April 2022, it is currently less than 13,000. And Lilium isn’t alone in its penny stock woes. Hundreds of companies are currently below the one dollar mark.
Lilium does not see itself as powerless over the situation: The company expects that “progress both in the technical area and in raising capital” would be reflected in the share price and that Nasdaq’s minimum price requirements for Lilium will no longer be an issue in the future. What he doesn’t say is that companies can also consider a reverse stock split to correct course. A remedy that is reluctantly taken.
Of 420 Spacs, only 35 are listed above the issue price
Lilium went public in September 2021 with the help of a shell company. So-called “spacs” (short for Special Purpose Acquisition Company) are formed and listed for the sole purpose of bringing another company to the public capital market in a fast track process. From the point of view of critics, this also means that many young companies that do not actually meet the requirements for going public.
Data from Spactrack seems to prove them right: the database lists 420 companies that have gone public via Spac since 2019. Only 35 are currently trading above the typical issue price of $10.
Not only the low share price, but also the listing itself are increasingly becoming a burden for Lilium. On the one hand, the air taxi builder has to comply with regulations and, for example, report regularly on the course of business. This means effort and costs, because all statements to the US Securities and Exchange Commission (SEC) are highly sensitive and must be intensively checked from a legal point of view.
On the other hand, Lilium is currently not benefiting much from the listing. A company usually goes public to raise money. But that seems unthinkable for Lilium at the moment. In order to raise a significant sum in a capital increase, the company would have to place such a large number of new shares that the shareholdings of the existing shareholders would be severely diluted.
In addition, stock exchanges set minimum share prices for a listing. When listing on the Nasdaq, a share must usually cost at least four dollars, under certain conditions as little as two or three dollars.
However, Lilium rejected withdrawal considerations when asked by the Handelsblatt. A delisting would probably not be trivial either: the shareholders would have to be compensated, for example. And that, in turn, costs money that Lilium doesn’t currently have.
Co-founder Wiegand: “We are missing about 300 million dollars until the manned first flight”
Rather, the air taxi company needs fresh funds for the last and most important development phase of the electric vertical take-off: the construction of the series aircraft and its approval. A few months ago, Lilium announced that around half a billion dollars would be needed before approval. According to a shareholder letter published a few days ago, the company still had 206 million euros in liquidity at the end of 2022. For comparison: The market capitalization of the company is currently around 220 million euros.
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Co-founder and Chief Innovation Officer Daniel Wiegand recently specified capital requirements and financing plans to the Handelsblatt newspaper: “We are missing around 300 million dollars before the manned first flight.” The company is in talks about a new round of financing and is also talking to the authorities about possible state technology funding.
The funds are urgently needed. Because the production of the series jet is already underway. According to Wiegand, the first flight with a pilot on board is planned for the second half of 2024. The version of the plane that Lilium is already testing is controlled from the ground.
However, the year 2024 will probably not bring any sales, even if it is successful. Rather, the first piloted flight heralds a further test phase. “We will work with up to six aircraft for the certification. This phase will last about a year and a half.” Whether Lilium will then still be on the Nasdaq and what a sacking would mean for the company cannot yet be said. The company spokesman said: “We do not expect an exit and therefore do not speculate about it.”
More: Lilium starts building the series jet – and needs more money