Fickle Wall Street: Publicly traded drone, AAM companies grapple with stock delisting warnings

Like most successful startups that preceded them, many drone companies – and above all, the advanced air mobility (AAM) aircraft developers first inspired by UAVs – factored in stock flotations as an essential source of their financing (and possibly self-perceptions as leading sector forces). Now, however, some are finding being traded on Wall Street can generate as much distraction and drag as it has capital to soar from.

Likely because of the greater volumes of investment required to develop their aerial tech, AAM companies have relied on stock flotations for funding in far greater numbers than their drone peers (Joby, Archer, Eve, and Vertical, to name a few). But publicly traded startups in both activities have had to deal with the vexing vagaries of investor enthusiasm since their IPOs – often downward fluctuations that have led AgEagle, Draganfly, and Lilium to all reportedly receive warnings about possibly being escorted from elite Wall Street indexes in recent months.

Stock-focused media reports in late September stated Saskatchewan-based drone firm Draganfly had gotten notice from NASDAQ that it could be forced from the index if it didn’t return to compliance with one of the main Wall Street rules drone and AAM startups have fallen frequently afoul of: raising its share price above the minimum $1 level after it had slipped below that threshold for 30 consecutive days.

Publicly traded agricultural drone company AgEagle reportedly received a similar warning from stock market watchdogs earlier, as did German AAM aircraft developer Lilium. All experienced extended share price slumps to under a buck – putting them into the unflattering “penny stock” club and exposing them to risks of equally dreaded Wall Street delisting. 

Were that to happen, it wouldn’t necessarily mean eventual business doom, much less immediate financial death.

In such cases, delisted companies unhappily watch their stocks exit the easy, fast, and status-enriched activity of indices for the slower, anonymous, lower-volume sphere of over-the-counter trading by private brokers. 

Not the end of the world, but also not world-famous markets that propelled Apple’s valuation to nearly $3 trillion or attracted the investments of the Warren Buffetts of the globe.

Plus, delisting carries a similar stigma to an MLB veteran being sent down to the minors or a top-tier pro soccer club relegated to the lower leagues – all of which complicate a price rebound of demoted stocks and further complicate efforts by company executives to recruit new development capital.

It is, in other words, as humiliating and problematic to future growth and financing plans as the day went public was full of potential and optimism. Yet delisting and its consequences may never evolve beyond mere warnings to Draganfly or AgEagle, which may avert that fate as Lilium did. 

After facing a possible NASDAQ ouster for prolonged subdollar trading during the early part of 2023, the German AAM company found new life through a $386 million infusion of new funds. Those increased its reserves, investor outlook, and share prices in a single announcement. Something similar – or big new business breakthroughs – could feasibly send stocks of the two drone startups rising again as well.

Awaiting that, NASDAQ watchdogs gave both firms six months to return to buck-level and maintain those prices for at least 10 consecutive workdays to reach conformity again. Half a year is a relatively long time to find a way of inspiring investors to trade stocks toward a modest rise, and a couple of weeks is a pretty short jolt to keep them buoyant. That’s something executives at the two innovative, forward-looking drone startups will doubtless be looking to manage this winter.

Meanwhile, anyone doubting how fast fortunes on Wall Street change should ask marquee AAM companies Joby and Archer what their average market month is like. They’d likely respond that it takes only days – if not mere hours – before slides of their respective stocks reverse course and begin rising following new business breakthroughs – only to then reverse course and repeat over and over and over again as investors do that lemming thing they do so well.

What UAV companies are safe from such gyrations?

Mostly firms producing drones and other tech used for military purposes in places like Ukraine. Unlike the commercial craft manufacturers and AAM services that still need to demonstrate applied enterprise applications can broaden and scale to full potential, defense-focused firms benefit from the enormous orders the US government continues sending their way – and will likely do more of as the Pentagon begins increasingly relying on small UAVs in its military planning.

Image: Daniel Lloyd Blunk-Fernández