China’s Autonomous Drone Startup Ehang Files For American IPO

Morning Markets: What loses money and isn’t commercial ready to fly autonomously? This IPO.

Another Chinese company has filed to go public on the American market this week, this time it’s Ehang.

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Ehang, which makes autonomous aerial vehicles, filed paperwork with the Securities and Exchange Commission to go public on the Nasdaq. The company lists a $100 million raised in its IPO documents, a standard placeholder figure meant to help investors gauge the possible size of the offering.

As a private company, Ehang raised $52 million in known venture capital, with its most recent round being a Series B in August 2015. Ehang is a fairly young company, as it was founded in 2014, according to Crunchbase. It also stands out in the crowd of startups we’ve seen go public this year, being a much younger company with less venture funding than others we’ve written about in 2019.

Ehang raised $10 million in its Series A in December 2014, less than a year before its $42 million Series B in August 2015. It counts GP Capital and GGV Capital as investors. Morgan Stanley and Credit Suisse are among the underwriters for the company’s IPO.

With everything we hear about companies burning through cash to make self-driving cars a reality, it’s a nice change of pace to hear about a company grinding to make self-flying planes a reality. Let’s see how they’re doing, money-wise.

Financial Results

Ehang is a nascent company with modest revenue and regular losses. It doesn’t fit the profile of companies that we’ve covered lately. Think of it more like a biotech offering. Here’s a company working on getting its product to the point of commercial viability; you can invest in that if you’d like, but it’s risk profile is a bit different than a SaaS company.

Indeed, Ehang’s F-1 filing notes that it has only delivered “38 passenger-grade AAVs for testing.” AAV is an acronym for “autonomous aerial vehicle. Aside from the three dozen testing AAVs, the company has also “developed two command-and-control centers for smart city management.”

Ehang’s F-1 filing does note that the company has “unfilled purchase orders for 28 passenger-grade AAVs.”

As you can imagine, it’s income statement doesn’t include rapid growth. The company’s revenues fell nearly 16 in the first half of 2019 compared to the same period of 2018, with just $4.7 million in revenue during the first six months of this year. Ehang’s H1 2019 net loss of $5.5 million was up 42 percent from the year-ago period.

The AAV company had $8.8 million in cash and equivalents on-hand at the end of Q2 2019. With $5.8 million in operating cash burn in the first half of 2019 you can see why the firm is raising more capital through an IPO.

Ehang raised several known rounds (Crunhbase has previously mentioned notes on its Series A and Series B). The company’s F-1 filing discloses some seed funding and a Series C that were previously unknown to external parties. (Indeed all H1 2019 cash from financing that the company secured came from its Series C, the document says.)

The company notes in its filing that it intends to use its net IPO proceeds to fund its operations (research and development and sales and marketing) “expanding production capacity,” and “developing urban air mobility solutions, such as passenger air mobility services and urban air logistics services, and ”general corporate purposes.”

We don’t see too many IPOs like this one. It harks back to NIO, an electric car company from China that also had a limited history of product delivery and revenue generation. That one didn’t go well, with NIO’s stock losing nearly all its value after the offering. Perhaps Ehang will prove more successful.

Illustration: Dom Guzman