Reported Company:

Joby Aviation

Researcher Company:

Kerrisdale Capital

Price at Report Date:

Close Price Day after report date:

5.9

% Decline Day after Report Date:

% Decline vs Yesterdays Date:

0.1695

Summary

Kerrisdale Capital Management, a firm known for its activist short positions, has recently published a report on Joby Aviation (NYSE:JOBY), a company developing electric vertical takeoff and landing (eVTOL) aircraft. The report criticizes Joby Aviation’s technological and business prospects, arguing that the company is significantly overvalued and faces numerous challenges that threaten its long-term viability.

Who is Joby Aviation?

Joby Aviation is a California-based aerospace company focused on developing and commercializing electric vertical takeoff and landing (eVTOL) aircraft. Founded in 2009, the company aims to revolutionize urban air mobility by creating a new mode of transportation that is quieter, more efficient, and environmentally friendly. Joby has received substantial investment, including from major players like Toyota and Uber, and went public via a SPAC merger in 2021. The company has yet to achieve commercial operations but aims to launch its eVTOL service by 2025.

Key Points from Report

Technological and Regulatory Hurdles

• Operating Costs Exceed Revenue: The report highlights that Riot’s operating costs have consistently outpaced its revenues, leading to substantial losses. Despite Bitcoin’s price surge in recent years, Riot has struggled to turn a profit, with its cost of revenue often exceeding its Bitcoin mining income.
• Regulatory Challenges: The report underscores the stringent regulatory environment surrounding eVTOL certification. Kerrisdale argues that the Federal Aviation Administration (FAA) approval process could take years longer than Joby anticipates, further delaying commercial operations.

Financial Overvaluation

• Overly Optimistic Projections: Kerrisdale criticizes Joby’s financial projections, claiming they are based on overly optimistic assumptions about market size, penetration rates, and pricing power. The report suggests that the actual market for eVTOLs could be much smaller than what Joby forecasts.
• Cash Burn and Capital Needs: The report notes Joby’s high cash burn rate, estimating that the company will need to raise significant additional capital to fund its operations through to commercialization. This could dilute existing shareholders and strain the company’s finances.

Market and Competitive Risks

• Lack of Proven Demand: Kerrisdale raises concerns about the actual demand for eVTOL services, pointing out that the market is untested, and there is no clear evidence that consumers will adopt this new mode of transportation at the scale Joby expects.
• Intense Competition: The report also highlights the intense competition in the eVTOL space, with numerous well-funded startups and established aerospace companies vying for market share. Kerrisdale suggests that Joby’s competitive position is weaker than it appears, particularly as larger firms with more resources enter the market.

Questionable Strategic Decisions

• SPAC Merger and Valuation Concerns: Kerrisdale criticizes Joby’s decision to go public via a SPAC merger, arguing that the inflated valuation from the merger has not been justified by the company’s progress or prospects. The report implies that Joby’s management may have prioritized access to public markets over realistic business planning.
• Reliance on Partnerships: The report also questions Joby’s heavy reliance on strategic partnerships, such as those with Toyota and Uber. While these partnerships bring some advantages, Kerrisdale suggests they may not be enough to overcome the technical and commercial challenges Joby faces

Activ8 Finance Analysis

From the perspective of Activ8 Finance, Kerrisdale’s report on Joby Aviation raises significant concerns about the company’s long-term viability and its current valuation. The technological and regulatory challenges highlighted suggest that Joby may face delays and higher-than-expected costs in bringing its eVTOL service to market. The financial risks, including the potential for substantial dilution and the unproven nature of the eVTOL market, further add to the uncertainty. Investors should exercise caution, as the optimistic projections made by Joby may not fully account for these challenges. While Joby has strong partnerships and a vision for the future of urban mobility, the path to profitability appears fraught with obstacles that could impact shareholder value.