In the realm of flying car plays, Archer Aviation (NYSE:ACHR) stock has been outperforming the competition in the past six months, with its shares more than doubling in price since March.
This electric vertical takeoff and landing company has captured investors’ attention in this booming sector.
In this speculative, high-growth sector where top investors are also involved, a 20% decline in ACHR stock could present an attractive entry point.
Archer has secured FAA approvals for early 2024 flight tests, offering potential stock catalysts, along with other long-term factors to monitor.
This has led to impressive stock growth, with ACHR stock soaring more than 150% this year. However, the company faces a class-action lawsuit, partly based on a short report by Grizzly Research, and filed by law firm Pomerantz LLP.
We will discuss the lawsuit and its potential impact on Archer’s stock, as well as other key factors to keep in mind for investors.
The Lawsuit and ACHR Stock
Archer Aviation faces a class-action lawsuit alleging misleading statements about its business and the certification process of its electric air taxi, Midnight, which aims to carry passengers by 2025. The suit was filed on Sept. 21 in California.
The lawsuit relies on findings from a report by Grizzly Research dated August 16. It claims that Archer, CEO Adam Goldstein, and others made deceptive statements about the company’s advancements, potentially breaching US securities laws. Archer disputes these allegations.
Pomerantz, a law firm known for pursuing class-action lawsuits against various firms, filed the suit. Robert Willoughby of Pomerantz states the Archer case relies on factual and publicly accessible data.
Alongside Archer and Goldstein, the lawsuit also mentions former co-CEO Brett Adcock, current CFO Mark Mesler, and former CFO Ben Lu.
What Now
On August 16, 2023, Grizzly Research released a report accusing Archer of using edited flight videos to exaggerate its testing and aircraft capabilities.
The report also alleged misrepresentation of manufacturing facility timelines and FAA certification. Archer’s stock dropped 6.5% to $5.94 per share on this news, causing investor losses.
The class action against Archer Aviation carries significant consequences for the company, its shareholders, and the electric aviation sector. It necessitates a robust defense from Archer to safeguard its reputation, financial stability, and industry standing.
Archer Remains High-Profile
Archer is a prominent player in the eVTOL sector, developing the four-passenger Midnight aircraft and hiring former FAA acting administrator Billy Nolen as its chief safety officer.
Despite promises of revolutionizing urban short-distance travel, the air taxi industry faces regulatory uncertainties, including FAA oversight.
Archer Aviation, known for its electric vertical takeoff and landing aircraft, secured a $142 million U.S. Air Force contract and over $1.1 billion in funding, including support from Boeing and ARK Invest.
FAA approved Midnight eVTOL model flight tests. Focusing on efficiency, Archer aims for production by 2023, flight tests in 2024, and service by 2025.
I think this company remains an intriguing speculative bet, despite this potential headwind. This class-action lawsuit certainly brings more uncertainty to this story.
However, the onus will be on the law firm to prove wrongdoing on the part of the company. I’m not so sure we can easily make an argument for shareholder value destruction, at least not since the beginning of this year.
As long as Archer continues to outperform, I think investors can hold on for the ride.
On the date of publication, Chris MacDonald did not have (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.
