Air taxi developer Vertical Aerospace faces a weekend of crucial talks between founder Stephen Fitzpatrick and Mudrick Capital, the company’s largest creditor, aimed at staving off a looming cash crisis.
New York-headquartered Mudrick has pledged to inject $75 million in to Vertical – $25 million of its own cash and $50 million from external investors – in exchange for shares and warrants but has seen its offer repeatedly rebuffed by Fitzpatrick.
FlightGlobal understands that founder and chief investment officer Jason Mudrick has flown to the UK to meet with Fitzpatrick in a bid to break the impasse.
Insiders suggest that the issue will be “resolved one way or the other this weekend”.
Fitzpatrick remains the largest shareholder in the business but is seemingly reluctant to sanction further outside investment for fear of diluting his stake.
In January this year, Fitzpatrick agreed to inject a total of $50 million into the business in two tranches via his company Imagination Aero Investments. While the initial $25 million was handed over, the remainder, due in August, is still outstanding.
Even if the full amount had been received it does not address the business’s “significant” long-term funding requirements, or the complication that it remains “a founder-led business”, insiders argue.
Although it has been spending more modestly than its contemporaries, Vertical has still been burning though cash as it races to bring its VX4 electric vertical take-off and landing (eVTOL) VX4 to market.
As at 30 June, Vertical held cash and cash equivalents worth £67 million ($84 million), a figure that had fallen to £48 million by 17 September.
Cash outflow in the second half was forecast to be £40-45 million, the company’s half-year accounts state, leaving the coffers perilously depleted by year-end. In September, Vertical said its ”projected cash runway” extended until the second quarter of 2025.
As a result, Vertical has been seeking fresh investment, but with no success.
Vertical first turned to Mudrick for funding in 2021 after a US stock market listing via its merger with a so-called special purpose acquisition company, or SPAC, failed to raise as much capital as hoped.
In return for a $200 million investment in the business – the balance has since risen to $250 million – Mudrick received convertible notes and warrants in Vertical. These would see the company acquire a majority stake in the developer when they vest in December 2026.
Importantly, the agreement between the two parties includes a clause to prevent dilution of Mudrick’s holding. Additionally, Mudrick holds security over shares in the main UK business, Vertical Aerospace Group Ltd.
Should Vertical fail to secure fresh funding then insolvency proceedings are the likely result. As the largest secured creditor, Mudrick would emerge as the company’s effective owner.
In a 23 October letter to Vertical’s board, Mudrick writes that it has engaged with Vertical for the “better part of two years” to “address its funding and liquidity needs” with its latest proposal – the $75 million injection – submitted on 20 October.
Mudrick says it is “the only financing proposal that the company has received” and would fund Vertical’s operations “into 2026”.
It would also, Mudrick argues, “maximise the probability” that Vertical will be able to “raise the significant additional capital that we believe is needed to get through the design and certification process and into production.”
Should it fail to reach an agreement with Fitzpatrick, Mudrick calls on the board to put in place “contingency plans” to “facilitate an orderly transfer of the business to new ownership”.
Vertical adds: “We do not comment on ongoing discussions with investors, and we are exploring all options available to us with respect to our funding needs.”
In September, Vertical announced that it had completed the first phase of tethered tests with its latest VX4 prototype. The next step, untethered thrust-borne flight tests, are likely to commence shortly.
