Airo Group, the owner of Jaunt Air Mobility, plans to go public
By Paul Brinkmann|March 10, 2023
Jaunt poised to become latest air taxi developer to place its fate in a SPAC fundraising mechanism
Relatively quick access to funding is the major reason that Chicago-based Airo Group, an aviation company that includes air taxi developer Jaunt Air Mobility, has decided to become publicly traded through a special purpose acquisition company, Airo’s chairman, Dr. Chirinjeev Kathuria, a physician and investor, told me in an interview.
The SPAC plan, announced Monday, is meant to raise funds more quickly than a traditional initial public offering of stock, and follows similar transactions by other developers of eVTOLs, electric vertical takeoff and landing aircraft, including California companies Joby Aviation and Archer Aviation, and Germany-based Lilium, all of which went public through SPACs in 2021.
Airo Group plans to merge with the newly created SPAC, Kernel Group Holdings, a publicly traded company on Nasdaq, later this year. This will result in a combined company retaining the Airo Group name with a projected enterprise value of $847 million, according to the companies’ announcement. That compares to Joby’s post-merger value of of $4.5 billion.
Airo Group is focused on avionics and drones, but also owns Texas-based Jaunt, which plans to sell its Journey eVTOL to air taxi operators. The company plans to type certify the electric Journey as a helicopter with Transport Canada’s Civil Aviation Directorate in 2027, Kathuria says. The Journey is unique in the eVTOL industry because lift would be provided by a single large rotor.
Kathuria says neither a traditional initial public offering (IPO) nor venture investment were practical for several reasons. “We have a very volatile IPO market these days,” Kathuria says. “Over the past year, there have been very few of them and far between. So we thought that we need to raise capital fairly quickly. And that’s why we thought it was important to go through a SPAC transaction.”
While Airo Group has investors, the eVTOL industry has become crowded already with big manufacturers as investors, including Toyota, which made a $400 million investment in Joby, and Boeing, which made a $450 million investment in Wisk Aero of California.
“A lot of the manufacturers have already invested in this space, but we’re also talking to some significant strategic investors who haven’t yet, including some large automobile manufacturers,” Kathuria says.
“I’m of Indian origin, so that may give you a clue,” he says, declining to elaborate. Two large India-based auto companies are Mahindra Group and Ashok Leyland.
For a little more perspective, I spoke with Jay Ritter, a professor of finance at the University of Florida, who has published papers and spoken frequently about public offerings and SPACs.
While SPACs like Airo’s do offer relatively quick access to capital, there’s also a “taint” involved for such transactions, Ritter says, because it indicates a lack of interest from venture capitalists, the class of investor that normally invests in technology startups.
“The question is, ‘Have the venture capitalists looked at it, kicked the tires, and said this may be viable but it’s going to take a lot of money and time?’ And they aren’t interested,” Ritter says.
He points out that the share price for Kernel Group Holdings barely moved after the announcement Monday that its target company was Airo, from $10.22 to $10.24.
“That’s a barely perceptible change, so the market does not expect that this is great news for the SPAC investors,” Ritter says.
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