New investment agreement to fund Vertical Aerospace through 2025
December 23, 2024
With cash runaway of increasingly critical concern, Vertical Aerospace has reached a new strategic agreement with investor Mudrick Capital, addressing its immediate liquidity needs and opening the door for potential third-party funding. The UK-based eVTOL developer is also looking to close a new funding round in Q1 2025 which will fund operations towards the end of the year, further strengthening its financial position.
Successful closing of this deal (and the injection of additional capital) will be key in extending Vertical’s existing resources which currently provide for operations “into, but not longer than, the first quarter of 2025,” confirmed Vertical in a SEC filing – adding that it intends to “launch and complete the [new] equity placement during the first quarter of 2025 before the Company has used all its existing resources”. An extraordinary general meeting of shareholders is currently underway “to vote upon certain amendments to the company’s memorandum and articles of association in accordance with the investment agreement”.
This “significant investment agreement that strengthens [Vertical’s] balance sheet and funds [the company] towards the end of next year” was first announced on 20 December. Signed by Vertical’s primary creditor US investment management firm Mudrick Capital, and majority shareholder and founder Stephen Fitzpatrick, the funding will strengthen the company’s financial position at a crucial time – building on its ‘Flightpath 2030’ strategy launched last month.
“The agreement funds Vertical’s operations towards the end of 2025, while also removing or mitigating certain structural obstacles that have impeded the Company from accessing substantial third-party funding since its public listing,” confirmed Vertical.
As of 30 September 2024, Vertical had £42.8 million of cash and cash equivalents on hand; estimating its net cash outflow from operations in the second half of the year to reach between £40- £45 million. With approximately £25 million remaining as of 20 December, it appears to have used less cash than forecast, although the continuation of the flight test campaign and upcoming certification process will doubtless necessitate expedited cash solutions to an impending cash runaway.
The new “comprehensive deal” between Vertical and Mudrick Capital was first announced in November, pledging to add approximately $180 to Vertical’s balance sheet. This included up to $50 million in cash (comprising $25 million upfront alongside an additional $25 million ‘backstop’) and the conversion of around $130 million of debt into equity. Other financially beneficial measures (such as delaying a loan repayment date until Vertical’s revised certification ate of 2028) were also proposed.
In the first half of 2024, “Vertical maintained its industry-leading capital efficiency with an H1 2024 operating loss of £20 million,” stated the company, attributing the loss to the completion of Vertical’s second full-scale prototype aircraft. For the nine months ended 30 September 2024, Vertical’s net loss (as detailed in a 20 December SEC filing) stood at £45.6 million.
In November 2024, Vertical confirmed that it expects to be “sustainably cash generative, achieving cash break-even in 2030;” underpinned by its confidence in “the capital efficiency of its focused OEM business model”.
Building on what CEO Stuart Simpson described as “a momentous quarter” for the business – including the commencement of the piloted flight test programme, something “few in the industry” have achieved – “I could not be prouder of the team or more excited to get into 2025,” concluded Simpson.
