Loving Lilium (9): The Investor’s Journey (I)

Why Lilium

Last weeks, we received many questions why E-vestment selected Lilium stock. That’s a simple question, but not simple to answer. Let’s first give you some context. E-vestment only invests in public listed leading companies, focused on e-mobility. For this moment only Lilium is selected. Our intuition tells us that Lilium will become the leading eVTOL. But intuition is not enough, it needs landing in reality and reality must give full evidence. And that’s the point where our Investor’s Journey starts. But first let’s give you some of our history.

Trending disruptive tech

E-vestment has a high risk profile on the asset side and is covered by own funds. These own funds are earned by previous investments in 3 disruptive tech companies started at the beginning of the internet trend (1995) and the mobile gaming trend (2008). So we are experienced in trending disruptive tech: one company failed, one survived the internet bubble and one was a worldwide hit. The worldwide hit was driven by a perfect timing in a fast upcoming market, so the trend was our friend. The internet/app Journey ended: we sold our shares in 2020 and started looking for new opportunities.

The Investor’s Journey

In Q3-2021 a friend advised us to buy Lilium shares, because of their disruptive electric ducted fan propulsion tech. But we don’t like SPAC’s and Lilium’s introduction price on the Nasdaq was in our opinion to high (~ $ 10) and also was the market cap (> 3 bln). It all looked like the internet bubble in the late nineties. Interest rates were below zero and assets were blown up, thanks to our Central Banks. But inflation came in, interest rates rose and the eVTOL bubble deflated, so Lilium’s share price fell.

Our interest started after CEO Klaus Roewe came in during summer 2022. Adding his Airbus experience (he managed world’s most successful Airbus family), his reputation and worldwide network, he could make the difference. So we started to invest Q4 2022 - Q1 2023 at an average price of $ 1,31. After the shareprice fell to $ 0,40 - $ 0,45 in April 2023 we decided to follow our average price strategy and nearly tripled our position. Timing is the most difficult part of investing, but if you have enough cash, you can lower your average price when the share price falls.

The call option

The share price of startups behave like a call option on an unknown future. If the future looks bright the share price goes sky high, but with stormy weather the shares can hit the ground. So it is a turbulent Journey. The shareholders of E-vestment don’t need money for their living. By having normal living standards and being debt free, we can afford to invest the excess in long 10 years Journeys that brings joy.

The trend is your friend

Investing in Lilium is a turbulent Journey with a lot of challenges, because start-ups mostly fail and end up bankrupt, merge or their IP is sold. But we believe in disruptive tech and the world climate needs the change to go full electric. So we need e-mobility, driven by sustainable, renewable energy. So e-mobility is trending, starting with Tesla in 2010. Remember, the trend is your friend and timing is crucial.

And that’s where Lilium is coming in, it’s full electric and they use IP protected ducted fan technology. Ducted fans are more efficient during flight than open rotor systems, are safer and bring less noise pollution. Lilium is not positioned as an air taxi, because ducted fans use more energy for hover, so Lilium is positioned in the field of regional flights. Most competitors in the field of Advanced Air Mobility (AAM) use open rotor systems, look like “blown up drones” or helicopters. Lilium looks like a private jet, coming directly from the future: science fiction landing in reality. Lilium not only has vertical take-off and landing capabilities, but also has ultra short conventional takeoff and landing capabilities. So more range is optional.

Falling in Love

The design of Lilium is amazing. When we saw the looks, we fell in love with her. Loving Lilium was born and in February 2023 we started writing articles: Loving Lilium (1) was the first. We think Lilium is a highly desirable product, because of her looks. But good looking is not enough. For becoming a successful investment, Lilium needs to become the Leading eVTOL. Good looks is only one link in a chain. But all links in the chain are important, if one breaks, the whole chain breaks.

The Leading eVTOL

To become the Leading vVTOL, Lilium is on The Leader’s Journey, a Journey with many challenges. Lilium needs endurance, good luck and a good timing to overcome these challenges to have or to become: ?

01. enough cash for the 250 mln annual cash burn, total cashburn before introduction end 2025 is > 1 bln

02. the best “shareholding” partners for strategy and synergy in batteries, production and services

03. the best leaders and world’s best in class people working for Lilium

04. the best in class tier 1 suppliers with aviation experience

05. the highest safety standards for certification end 2025

06. the highest pay load for the lowest cost per passenger

07. the lowest noise pollution for takeoff and landing, so cities open their ports

08. the best and overtime fast improving batteries and operational range

09. the best costumer experience, so customers feel good during a safe and quiet flight

10. a scalable design for more passengers per flight and lower costs per passenger

11. an industry leading cost per kilometer per passenger, mainly for scheduled shuttle services

12. the best sales strategy starting high end for market adoption driven by a great customer experience before the high volume shuttle market starts

13. fast growing worldwide sales in all continents

14. ending up with a good business model earning money and creating positive cashflow on the mix of?initial production fees and recurring services fees

To overcome those challenges Lilium needs support from investors, suppliers, (potential) clients and authorities. Now, especially for challenges 01 and 02, because these are Lilium’s biggest weaknesses during difficult market circumstances.

Lilium Lovers and Haters

Among the spectators of Lilium’s Journey, there are Lilium Lovers and they support Lilium. But among the spectators there are also yelling Lilium haters, writing negative articles and comments, hoping Lilium fails by taking challenges, especially 01, 02, 05, 08, 12, 13 and 14. They often invest in other eVTOL’s so they have opposing interests, shorted Lilium stock (Iceberg early 2022) or are frustrated people. They never visited Lilium themselves, don’t have connections with Lilium people and often don’t use actual facts. We always welcome their negative comments, so we can check the real facts ourselves, now or in future.

The real facts

Some of the real facts are: Lilium has the best looks, the most supporters on LinkedIn (> 172.000) in this category, the highest payload (7 seater), the best proven SA batteries (340 watt/kg energy density and up to 5 times more power) capable to meet aviation safety standards, the lowest noise, the lowest cost per km per passenger in her class and going for the highest safety certification standard (EASA 1: 1.000.000.000). And last but not least, their sales strategy starts to work. Already 31 of the 50 Lilium Pioneer Jets are sold or in option, with prepayments: only 19 to go for the rest of 2023.

Coming weeks: challenges 01, 02 and 13

Coming weeks we are waiting for Lilium news for challenges 01, 02 and 13, all feeding challenge 14:

01. In May 2023 a capital raise was announced for $250 mln @ $1: $100 mln is placed (Tencent, warrants with 100 mln cash prepayment) and now we are waiting for 75mln Tencent warrant commitment conditionally linked to successful raising of 75mln other equity, debt or grants from third parties.

02. CEO Klaus Roewe hinted several times that he’s talking with potential partners for strategy/synergy. Tencent - as the major shareholder - is not enough. Tencent wants to end up with a 19,8% stake, so we expect new partners coming in that buy new shares and/or buy the Tencent warrants.

13. At this moment the sales funnel is up to 645 Lilium Jets, for 3 continents. There is a need for converting existing commercial airline MoU’s into binding purchase agreements so future (pre)payments can be scheduled. During Paris (June 19 - 25 ) more news will come, according to the shareholdersletter Q1-2023.?But “up to 645” is not enough. And also China must come in as the fourth continent for sales. So Tencent - as a major shareholder - must support the entrance to their home market.

14. We think that ending up with a good business model in the period 2028 - 2030 means that a 4 years order portfolio of at least 1600 will lead to an annual production of at least 400 Lilium Jets. We expect that yearly revenues (production and recurring services) of approximately € 4 bln can generate a potential 10% ebitda margin. With an estimated 600 mln outstanding shares in 2026 - we hope further dilution will not be necessary - a valuation of 8 - 10 times ebitda and a euro/dollar conversion of 1.1, the maximum potential upside is a shareprice between $ 5,90 - $ 7,30.

For now this upside seems impossible, it’s still a long, long Journey to go with a lot of challenges and uncertainties. At May 1 2023 we saw a downside to even $ 0,37 the day before a new $1 capital raise was announced. After the announcement we saw a spectacular recovery to > $ 1.That’s what we call heavy turbulence.

Your Investor’s Journey

Are you inspired and prepared for a turbulent Journey? Do you have the same risk appetite as we have or even more? Than fasten your seatbelts and enjoy your flight. It’s a full own risk flight. There is no travel insurance at all, except extra cash on board. So you can use turbulences to lower your average price. And you only know that the trend is your friend. We hope to meet you soon.

Please note that this article is not an advice to buy or sell Lilium stock. Investing in startup’s is high risk and timing is difficult, you can lose all your money. So (the high) risk profile must fit your (high risk) appetite.?

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Lilium - The Leaders Journey - The Full Story Book

You can find all single LinkedIn Loving Lilium articles here.

But there is much more for inspiration! If you want to read The Full Story, you can download the Book for free on our website.

This book is about – you might have guessed already – Lilium. But it is not solely about the most promising and captivating innovation of full electric flying. This book is also about ‘The Leaders Journey’, a full-proof leadership model. I noticed how the Lilium Team follows this path and therefore I am convinced the world will be blown away when Lilium will be officially launched. It will be a revolution in the history of aviation.

Loving Lilium

So, in this book I am sharing the Lillium story, from the perspective of an investor. I instantly fell in love with the model and with the concept (hence the name ‘Loving Lilium’). I am a strong believer and therefore part of the so-called group of early adopters. I will be scanning the market to bring you stories on new developments. But I will also provide information from the inside out, because I was invited to interview members of the Lilium Team. So, if you are interested in Lilium, their sustainability journey, in electric flying and/or in aviation in general, this book will definitely be worth reading.

The Leaders Journey

This book also is about leadership and the journey towards a solid business with a strong business model. As an experienced business innovator I developed ‘The Leaders Journey’. The falling in love with Lilium (an act of the heart) was immediately complemented by the fact that Lilium is following a determined roadmap to success (a realisation of the mind). By telling the Lilium stories I will show you the powerful effect of the Leaders Journey Roadmap. You can of course translate this information to your own (to be created) business. The roadmap helps you finding your destination and setting new milestones. So, if you are interested in a full-proof business model, elaborated by the story of people who dare to dream big (or even sky high), this book will definitely inspire you.

A living book

This book is a living book in which Lilium and some of Lilium's customers will be followed for the next years. As a result, new updates of the book will appear at least monthly, featuring new stories. This book also compiles all previous publications. The most recent book is always available for free download at www.lovinglilium.com.

Menno van Diermen (mailto:[email protected])

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