In-depth analysis uncovers the secrets behind market moves.

Air Taxi Firm Lilium Plunges 60% After Main Subsidiaries Will File for Insolvency, Cash Shortage Warnings

Wallstreet InsightThursday, Oct 24, 2024 10:30 am ET

1min read

Shares of Lilium plummeted on Thursday after the air taxi firm announced that its two main subsidiaries plan to file for insolvency in the coming days.

The stock initially tanked more than 60%, but the decline has since narrowed to 49%.

The German electric vertical takeoff and landing (eVTOL) company, listed on Nasdaq, disclosed that it had received an indication that the budget committee of the parliament of the Federal Republic of Germany would not approve a €50 million guarantee for a contemplated €100 million convertible loan from KfW. Consequently, Lilium GmbH and Lilium eAircraft GmbH will file for insolvency soon.

The company also stated that it has not reached an agreement with the Free State of Bavaria regarding a guarantee of at least €50 million. Additionally, Lilium has been unable to raise sufficient additional funds to continue the operations of its principal operating wholly-owned German subsidiaries, Lilium GmbH and Lilium eAircraft GmbH. As a result, these subsidiaries are overindebted and will unable to pay their existing liabilities due within the next few days. The management has informed the company that they must file for insolvency under German law and will apply for self-administration proceedings in Germany.

Within the next few days, the company expects the subsidiaries to file for insolvency in the competent court in Germany and apply for self-administration proceedings pursuant to Section 270(a) of the German Insolvency Code. However, there is no assurance that the applications for self-administration proceedings will be approved by the court.

As of the date of this report, the company and its subsidiaries have a limited amount of cash to conduct their operations. Unless the subsidiaries receive additional funds, they will not be able to conduct their ongoing operations consistent with past practices and will need to seek financing from third parties, including any purchaser of their assets.

Notably, just a day ago, GE Aerospace announced a partnership with Lilium to build a solid safety foundation for this new mode of travel. The two companies are combining their respective flight data and analytics platforms to develop scalable flight data management solutions that inform the right safety standards and guidelines for eVTOL operators.

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.