The Future of Advanced Air Mobility

On The Radar

SEC Filing Spells Out the Basis for Archer's $1.1 Billion Merger with Atlas SPAC

Atlas Crest Investment Corp. has filed an S-4 registration form with the U.S. Securities and Exchange Commission, spelling out details of its merger with eVTOL aircraft developer Archer Aviation. The March 8 filing came almost a month after Archer and the special purpose acquisition company (SPAC) announced plans for a $1.1 billion share flotation.

The document provides an interesting snapshot as to how SPAC-backed flotations, which are set to be a funding trend in the advanced air mobility sector, are structured. Though the process is somewhat hard to follow without guidance from a corporate attorney, the bottom line is that Atlas must seek approval from shareholders for the merger, which is due to be completed in the second quarter of 2021.

The filing shows that the basis for calculating the number of Class B shares in New Archer is based on an implied equity value for the company of $2.5 billion. On top of this, the deal includes $600 million in private investment in public equity (PIPE) financing from existing investors. While the equity holdings of cofounders Brett Adcock and Adam Goldstein are subject to a six-month lock-up, the PIPE investors are free to liquidate their holdings at will.

The board of the restructured Archer will have seven directors. In addition to co-CEOs Adcock and Goldstein, one of these will be Tom Muniz, who has just been promoted from engineering vice president to COO. The S-4 filing reveals that in 2020 total compensation for the former Kitty Hawk and Wisk executive was $822,915 (of which $500,000 was basic salary). The company now has 70 full-time employees and says that it is actively recruiting.

The filing also gives some insights into how Archer has functioned as a start-up since it was founded in 2019. For 2020, the outline balance sheet shows a net loss of $23.8 million after research and development costs increased by just over $20 million.

Archer has seven patent applications pending, covering technology such as the configuration of its Maker four-passenger, all-electric eVTOL aircraft, power distribution systems, controls, and battery management. The filing also provides further detail on the provisional agreement with United Airlines covering a potential order for up to 200 of the aircraft (see page 184).

Duff & Phelps, the company hired by Atlas to provide an independent assessment of Archer’s business prospects, based its report on a list of public companies that it determined were relatively similar, “primarily in terms of product, end market, and business model.” This list includes Airbus, Boeing, Uber, Lyft, EHang, and Wheels Up. Interestingly, the filing lists private charter flight providers Blade Urban Air Mobility and NetJets as prospective competitors, rather than prospective customers who might want to purchase eVTOL aircraft.

Subject to approval by Atlas shareholders, the merger with Archer is expected to be approved during the second quarter of 2021. Should the deal fall apart, Atlas, which completed its IPO on Oct. 31, 2020, would have until Oct. 31, 2022, to complete a merger with another takeover target.