Shares of Lilium, the maker of electric vertical take-off and landing vehicles (eVTOL), plunged more than 61% on Thursday after the company said in a regulatory filing that its two main subsidiaries would likely file for bankruptcy in the coming days.
The dramatic decline in the share price is due to a severe financial crisis that the aerospace start-up is going through. It is unable to obtain the state guarantees that it so urgently demanded from the German government.
In a regulatory notice to US authorities, Nasdaq-listed Lilium said it had been unable to raise sufficient additional funds to maintain operations of its two main subsidiaries, Lilium GmbH and Lilium eAircraft GmbH.
The management of these subsidiaries then came to the conclusion that they were “over-indebted” and would soon no longer be able to meet their payment obligations.
“The management of the subsidiaries has informed the company that they must file for bankruptcy under German law and, as a result, will apply for self-administration proceedings in Germany,” the company said in a statement.
After the bankruptcy filing, the subsidiaries do not have to repay any debts incurred before the bankruptcy filing, Lilium explained. In addition, creditors are fundamentally “prohibited from carrying out compulsory enforcement against the companies for any claims”.
The subsidiaries’ planned bankruptcy filings could result in a delisting of Lilium from the Nasdaq Global Select Market or a suspension of stock trading.
Federal government denies companies credit
In order to remain solvent, the company applied for 50 million euros from the federal government.
However, the Bundestag’s budget committee rejected the application, so Lilium now has to desperately look for alternative sources of financing.
In a statement released last week, Lilium confirmed that it had “received an indication that the Budget Committee of the Bundestag would not agree to a guarantee of 50 million euros.”
The proposed loan would have been provided by KfW and the rejection put the company in a precarious financial situation.
The German government’s refusal to support Lilium has drawn criticism from the industry.
Bavaria’s Economics Minister Hubert Aiwanger described the decision as “regrettable” and emphasized how important it is to support innovative industries such as electric aviation.
Danijel Višević, co-founder of climate technology investor World Fund, expressed disappointment and said the German government’s stance reflected a narrow view of eVTOL vehicles.
Višević argued that politicians mistakenly viewed air taxis as a luxury product for the rich, when in reality they represented a crucial step towards zero-emission transport.
The collapse of Europe’s hopes for flying cars
Lilium’s current difficulties mark a dramatic fall from grace for a company once hailed as Europe’s most promising player in the future of air mobility.
Founded in 2015, the startup wanted to revolutionize short-haul travel with zero-emission electric aircraft that would work like flying taxis.
The concept of eVTOL vehicles captured imaginations worldwide and Lilium received early support from well-known investors such as Atomico, Earlybird and Chinese technology giant Tencent.
In 2021, Lilium benefited from the Special Purpose Acquisition Company (SPAC) boom and merged with Qell Acquisition Corp. to Nasdaq.
At the time of listing, Lilium forecast aggressive growth, including revenue of €240 million by the end of 2024 and profitability by 2025.
However, since the IPO, Lilium’s share price has plunged more than 95% and the company is struggling to meet its ambitious goals.
Lilium’s jets can cost up to $9 million. The company also had a six-seat version in development that would have cost a buyer about $7 million.
Lilium doesn’t just face challenges. While the eVTOL industry is promising, it has proven financially challenging and many competitors have also struggled.
Volocopter, another German electric aviation startup, was on the verge of bankruptcy earlier this year and had applied for similar state guarantees from two German states and the federal government.
Although Volocopter has secured new funding, the company remains in a vulnerable position.
In the USA, eVTOL companies fared somewhat better: Joby Aviation received $600 million in state support from the American government.
