Thursday's news from next-generation aircraft developer Lilium (NASDAQ: LILM) was worrying. On the Germany-based company's admission that it would not be provided a loan guarantee by that country's federal government, investors eagerly sold out of its stock. At the end of the trading day, Lilium's U.S.-listed stock had lost more than 21% of its value.
Financing issues rear their head
Lilium divulged the news in a regulatory filing with the U.S. Securities and Exchange Commission (SEC). The company said that it "received indication" that the German parliament's budget committee would not approve that guarantee. This was to cover 50 million euros ($54 million) of a 100 million-euro ($109 million) convertible bond issue.
The convertible bonds were to be provided by KfW, an investment and development bank owned by the German state.
In its disclosure, Lilium said it was continuing negotiations with a prominent German land (province), Bavaria, to guarantee at least 50 million euros for the issue.
Lilium aims to commercialize its Lilium Jet, an electric vertical takeoff and landing (eVTOL) airplane that would serve as a taxi for people and cargo. At the beginning of October, the company announced that it had completed the first systems power-on of the model in a round of live testing. It said this "confirms that the aircraft is being built in accordance with Lilium's platform design and the flight systems are functioning correctly."
A highflier or a turkey?
Such an aircraft could potentially be the wave of the future for mobility, or just as easily a pipe dream that never wins widespread adaptation. As such, a company like Lilium is an extremely speculative investment; if it continues to struggle with financing, it won't be attractive for many investors.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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