Hedge fund criticizes Joby Aviation’s outlook for profitability as ‘delusional’

By Paul Brinkmann|October 13, 2023

Joby cites the fund’s “vested interest” in pushing down stock price

Miami Beach hedge fund Kerrisdale Capital released a report Tuesday describing Joby Aviation’s plans to rapidly certify its electric aircraft and reach profitability as “laughable” and “absurd.”

The report, “Joby Aviation Inc. — Prepare for Turbulence,” was accompanied by a legal disclaimer in which Kerrisdale revealed that it is shorting Joby’s stock, a process in which investors borrow shares at a given price and earn a gain if the stock is returned at a lower price.

In a statement to me, Joby made an apparent reference to Kerrisdale’s disclaimer, noting that the fund has “a vested interest in lowering the share price of Joby.” Joby encouraged investors to review its recent public filings with the U.S. Securities and Exchange Commission for “up-to-date information” about its “progress and financial projections.”

Joby also listed some developments over the past two months, including flying with a pilot aboard for the first time, stationing one of its S4 aircraft at a U.S. Air Force base for testing, and announcing Dayton, Ohio, as the location for a large-scale manufacturing facility.

Kerrisdale says in the 40-page report that Joby’s disclosed balance of $1.2 billion in cash (which according to Joby includes short-term investments) may run out before FAA issues an aircraft type certificate for Joby’s S4 air taxi design. Even if the company manages to earn type certification before running out of money, Kerrisdale says, the funds will definitely run out before Joby can become profitable. Kerrisdale based those predictions on Joby’s public filings indicating the company is spending up to $100 million per quarter.

“Joby’s management team is not completely blind to all this [spending], which is why they’ve been raising more capital even with their billion-dollar war chest,” according to the report.

Kerrisdale says the battery tech isn’t ready, and the report identifies that shortfall as one of Joby’s biggest problems: “to achieve aerial flight ranges of more than 50 miles, or the ability to fly at night and in less-than-perfect weather, completely new battery chemistries will need to be invented and commercialized.” The report says that by the time such technology is ready, Joby will be “a historical footnote.”

The opening section criticizes Joby’s S4 design and the company’s business approach, referring to them as: “A plane with science-project specs. A delusional production plan. A business model with zero consideration of economic realities.”

The report takes issue with what it calls the “Wall Street consensus” that Joby will break even in 2027, predicting that “no such thing is going to happen.”

Joby’s stock declined slightly the morning the report was released but recovered later that day.