I’ve gotten a ton of questions about Alex Koyfman’s “AirTesla” pitch over the past week, so we’ll spend a moment on that today.

This all ends up being a “next Tesla” pitch to a large degree — essentially, saying that if Tesla can create this trillion-dollar company to lead the electric vehicle revolution, and grow to be overwhelmingly larger than all the traditional automakers (combined!), then this company that is first to perfect the electric airplane will be maybe even more fantastic.

So before we go any further, please get that out of your head.

There’s only one Tesla — and you can’t extrapolate Tesla’s results using anything like sales or projections or product lineup or production volume, none of that has any relation to Tesla’s share price. If you believe in Tesla and think the company is worth a trillion dollars, then it’s almost religious — and trying to predict the next focus of religious fervor is a fool’s game. Many of the EV folks will try, and I’m sure the electric aircraft companies will try, too, but we shouldn’t go into anything with a “next Tesla” idea in the back of our heads, because that will short-circuit any rational skepticism we might have. There’s only one Tesla, and there’s only one Elon Musk — for whatever reason, it’s nearly impossible to build a cult like that from scratch.

That’s not to say Tesla is bad, (so please put your knives away, Tesla fans) — just that it’s not reasonable to use Tesla as the starting comparison for any new company. And when we’re talking about electric flight, we all need a little rational skepticism. Yes, they’re probably coming… and no, neither the regulatory world nor battery technology is really ready for them to be a big deal in the near future. We can forecast pretty heavy adoption of electric vehicles using current technology, if only because most people primarily use their cars to commute or drive locally, but forecasting wide adoption of electric airplanes requires technology that isn’t yet commercially available.

So that’s my skeptical take as we start our journey today… maybe Koyfman’s enthusiasm can build you up from there to a moderate and balanced perspective, but it’s best to start low. Here’s the intro to Koyfman’s pitch:

“Hands down… this is my #1 most URGENT discovery…

“This Astonishing ‘Next-Generation’ Civilian and Military Electric Flight Tech Could Create Even More Millionaires Than Tesla.

“With partners like JetBlue, Toyota, Uber, NASA, the FAA, and the U.S. Air Force… Smart investors could make up to 200 times their money simply by acting immediately on this stock before it takes off.

“‘AirTesla’ is landing soon… with a predicted market cap of $1.5 trillion. It’s clear that electric aircraft are the future. As an early investor in this ‘backdoor IPO,’ you could make up to 20,000% over the long term.”

What other clues does he drop about this particular company? Here are a few from the pitch:

“In 2012 the company was selected to collaborate with NASA on several groundbreaking electric flight projects, including the X-57 and LEAPTech…

“In 2017 the company’s first full-scale prototype took to the skies. And in 2019, its first production prototype began a rigorous flight testing program.

“In 2019, Toyota became a strategic investor and deployed dozens of engineers to work shoulder-to-shoulder with this company’s team, lending their expertise on factory layout, manufacturing process development, and high-volume production.

“In 2020, it became the first electric vertical takeoff and landing (eVTOL) vehicle company to receive airworthiness approval from the U.S Air Force as part of its Agility Prime program. Flying its aircraft on-base and having access to government testing facilities provided an opportunity to develop their operational capabilities in advance of commercial launch.”

We’re also getting ads that reference the company being the “Uber of the skies” because of their partnership with the ride-sharing company, which included an investment by Uber into this “AirTesla” company, and they’re apparently planning to integrate their air-taxi service with Uber’s systems.

And they’re also make some progress in the traditional aviation world, apparently:

“In 2020, the company agreed to a “G-1” certification basis for their aircraft with the FAA, laying a clear path to certifying its aircraft for mass commercial flights.

“The company recently announced it is working with JetBlue and Signature Flight Support to forge a new path toward net-zero emissions in the aviation industry that will incentivize the rapid commercialization of clean propulsion systems.

“The future — With more than 1,000 test flights behind it, the company is looking ahead to breaking ground on its first large-scale manufacturing facility later this year, certifying its aircraft in 2023, and starting commercial operations in 2024.”

We also get some hints about the company’s financials:

“Looking forward, the company expects to begin seeing revenue in 2024 following the commercialization of their air taxi service. In the first year of commercialization, it expects to record $131 million, according to its investor presentation.

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“Revenue is expected to continue growing to $721 million in 2025 and $2 billion by 2026.

“By 2026, the company expects to have 963 aircraft manufactured.

“These aircraft are expected to have a 15-year life span of operation, with a cost per aircraft upward of $1.3 million.

“Looking into the next 10 years of operations, the company expects to have 14,000 aircraft operating in 20 major cities, with revenue of $20 billion.

“Just for the sake of comparison, the annual revenue of Tesla back in 2018 was $21 billion.”

That’s way more than enough clues for the Thinkolator, but he also drops that they have now grown to 800 employees, they’re building a factory in Marina, California, and it’s what Kofyman calls a “Backdoor IPO Opportunity”, which almost certainly means it’s a company that is merging with a Special Purpose Acquisition Company (SPAC) to go public (or, perhaps, has already done so).

So what’s our stock? Thinkolator says that Koyfman is pitching Joby Aviation (JOBY), which is one of the leaders in the prospective “electric air taxi” space and came public through a SPAC merger that was finalized a few months ago. And as luck would have it, the stock is right at all-time lows, so if you love the idea you can pay less for it than previous fans paid over the past year or so.  That SPAC merger was announced back in the winter and finalized in August, so it’s no longer really a “backdoor” investment in an IPO, though JOBY after the SPAC merger does still have the same features as most other SPAC mergers: It also has warrants trading (JOBY/WS, typical terms — $11.50 strike price, five-year term, early redemption clause if the shares go above $18 for a month or so); it has been wildly volatile; it does not yet have any real revenue; and the justification for the business is made by projecting out to commercialization in 3-5 years.

We’ve all gotten very used to that during the past couple years of SPAC-mania, but it’s worth reminding you that this is unusual — for typical IPOs, the SEC doesn’t let companies boast about their five-year projections and justify their valuation based on a product or service that doesn’t exist yet, they force companies to emphasize the risks and limit the extent to which they make promises about future developments… but SPACs are different, since they’re technically mergers and not IPOs, and everyone involved, both the buyers (SPAC management) and the sellers (the company’s founders and venture backers) is incentivized to exaggerate the potential, so we’ve seen some real doozies in SPAC-land since what used to be a financial niche exploded into mass popularity in 2020. 

Some interesting companies have come public via SPAC mergers, and I’m sure many of them will work out someday and a few will probably become huge winners in the end, but the one thing that has been severely lacking in SPAC mergers is any kind of valuation discipline by the SPACs who are making these acquisitions, so almost all of them have been absurdly priced at one point or another. Which is partly a function of the market environment, to be fair — many “regular” IPOs have also been absurdly priced, particularly in the past couple years.

Koyfman’s numbers come from the presentation that Joby made in conjunction with the announcement of their SPAC deal early this year (they merged with Reinvent Technology Partners), and it does all sound quite impressive — particularly the promise that they can make a profit on these electric air taxis at a rate lower than charged by Uber Black, with revenue per average seat mile (RASM) of $1.73 and cost per average seat mile (CASM), including SG&A expenses (selling costs, admin costs, pilots, maintenance, depreciation, etc.) of only $0.86. If they can actually do that by 2026, and can build and put 1,000 or more air taxis into service by then (their assumptions depend on having 963 total aircraft), then it sounds delightful. The only problem, for me at least, is that I don’t trust the optimism of their projections — I don’t expect it to be that easy.

To be fair, I didn’t have much hope for Tesla a decade ago, either. Perhaps I just lack imagination in this area, and investors will fall in love with these tilt-wing quadcopters, and we’ll see them flying around every major city as they help the well-heeled avoid traffic congestion. They make some sense as an alternative to helicopters, but I am personally very skeptical that they’ll be able to hurdle all the technological and regulatory obstacles to get to wide commercial availability within five years. It’s not impossible, of course, I just think it’s improbable — and thanks to the SPAC merger and an investment by Uber, they do have $1.4 billion or so in cash on hand that they can use to prove me wrong.

I should also mention that Joby is far from being the only player in this space — the two that get most of the attention from investors right now are Joby and Lilium (LILM, which also went public through a SPAC merger this year), but there are lots of folks trying to develop electric planes, and just behind those two you can see Vertical Aerospace on the horizon, closing fast (they’re merging with the Broadstone Acquisition SPAC (BSN))… and, like Tesla in the early days, the easiest way to build a case for electric aviation is to pitch it as a service, in the case of JOBY an air taxi service, because building a fleet that you operate generates much more cash flow, at least in the perfect world of an investor presentation, than just selling the planes.

So there you have it… at least three billion-dollar public (or almost public) companies are trying to stake their claim on this space (Vertical and LILM are each about half the market cap of JOBY, and arguably a year or so behind in their development timeline), they’re all fat on SPAC money, and they’re trying to build a brand-new market for tilt-rotor electric air taxis or short-haul aircraft. How you get away with calling any of them a “microcap” investment, I don’t know, Joby is nearly a $5 billion company and Ilium is about $2 billion, with BSM’s current share price also assuming a $2 billion valuation for Vertical, so all are firmly in the small-to-mid-cap range in my book, but that’s neither here nor there.  If you want to compare the slightly different strategies and aircraft, you might start by browsing Lilium’s Analyst Day presentation and Vertical’s Investor Deck from their SPAC announcement back in June.

The bigger challenge, of course, is that we don’t know if there’s a big market for electric air taxis, or what the economics of that potential future market might look like — or, indeed, whether they’ll ever be more than a curiosity, assuming they do end up getting certification and establishing a comfortable level of safety and reliability and building up an infrastructure to support them (and as with all such leaps forward, I’ll take the “over” on the timing forecast).  Lilium is aiming for similar markets with its slightly larger and quieter electric VTOL jet (six passengers instead of Joby’s four), and has a similar range of about 150 miles, though in their marketing Lilium focuses a little more on short inter-city hops than on really local “taxi” service. Vertical is more focused on its airline partners and infrastructure, but the plane looks quite similar to Joby’s (Joby and Vertical both use four or six large rotors, Lilium uses tilting wings that have a larger number of smaller, jet-like fan rotors inside them).   If this starts out as a small niche business, as seems likely, then there’s certainly room for all three and many more to get started — I guess it could even end up being like the early days of the automobile business, when hundreds of brands fought for attention.

So yes, electric planes exist, at least in initial test versions that have some potential to enter real production over the next few years, but it’s likely to be a long haul while we wait for meaningful progress, and probably the biggest determining factor for where the stock prices of these companies go in the next couple years is how they manage investor expectations… and how patient investors are, particularly if we get into a real bear market. We’re nowhere near a real challenge for commercial or military jet aircraft — there just isn’t enough battery power available for heavy lift and high speeds, these are lightweight four or six-passenger aircraft that can go about 150 miles at a max speed of about 150-200 miles per hour (a little faster than a comparably-priced 4-seat helicopter, assuming the projections of a ~$1.2 million cost per airplane end up being accurate, though with dramatically less range), so the “get rich guys from Manhattan to JFK or the Hamptons” market makes sense, partly because these are way cooler (and greener, and quieter) than helicopters and people like cool stuff, but it will be a while before we know whether it works. If you’re interested in the technical challenges, which revolve mostly around battery weight and battery cooling, this is an interesting article to start with. If you want to see some of the other electric mobility companies that we might see going public in the future, there are dozens but my eye drifted to the Samson Switchblade flying car and the ambitious plans from Supernal, or the recently unveiled Kitty Hawk from Google co-founder Larry Page, who would like to be the first to have robotic electric air taxis in production… and there are also plenty of legacy aerospace players involved in electrifying aviation — including big guys like Honeywell and Rolls Royce who are in many cases supplying the engines or other systems for these planes. For me, this is still in the “really cool stuff, but I’m not convinced it’s worth an investment” category… but, like I said, I didn’t buy Tesla, either — maybe your opinion will be different than mine.

Disclosure: Of the companies mentioned above, I own shares of Google parent Alphabet in my Real Money Portfolio. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.