Shares of Joby Aviation (NYSE:JOBY) are in focus after short seller Kerrisdale Capital issued a short report on the electric vertical take-off and landing (eVTOL) company.
“We are short shares of Joby Aviation, a $4.8 billion development stage aircraft manufacturer that we believe is years away from generating operating revenue and which we don’t expect will ever earn an economic profit,” said Kerrisdale.
Kerrisdale questions the practicality of battery-powered flight, estimating that lithium-ion limitations will only allow a maximum range of 35 miles and a “few thousand cycles at best.” In contrast, Joby has stated that its aircraft will have a range of up to 100 miles and a 10,000-cycle battery life.
Next, Kerrisdale notes that Joby’s plan to manufacture its aircraft at a per unit cost of $1.3 million is unrealistic. “Seasoned manufacturers produce similar planes at more than 2x that,” said Kerrisdale. “eVTOL competitors expect closer to $5M/unit.”
JOBY Stock Plunges Following Kerrisdale Short Report
Kerrisdale also questions Joby’s intent to manufacture thousands, or even hundreds, of eVTOL aircrafts. The short seller points out that it took many years for experienced airplane manufacturers to scale up production. Furthermore, upon scaling up, these manufacturers barely got to 100 units per year.
Additionally, Kerrisdale explains how manufacturing aircrafts is an extremely cost-intensive process. It believes that Joby’s cost projections ignore certain expenses, and that flying in a helicopter produces greater savings.
Earlier this week, Joby founder and CEO JoeBen Bevirt stated in an interview that Joby could enter the commercial air taxi service by 2025. However, Kerrisdale argues that the company has done little real-life testing, and that the three completed certification stages it has completed out of five total have consisted mainly of paperwork. Kerrisdale states that stages 4 and 5 are the most intensive of the stages, in terms of both cost and effort.
Overall, Kerrisdale believes that Joby’s projections are a lingering effect of the special purpose acquisition company (SPAC) boom, and that it will run out of cash in two years, which spells dilution. The short seller has issued a price target of $0 for JOBY stock.
“The best case for investors here is a rough landing. We think they should be bracing for a nose-dive,” concluded Kerrisdale.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
