Vertical Aerospace Completes Final Prototype, Highlighting Technical Progress Amid Dire Financial Straits

What happened

Vertical Aerospace has completed its third and final full-scale prototype aircraft, which is set to double flight test capacity by adding a replica to its current testing fleet. This prototype will begin piloted flight testing after commissioning in January 2026, aiming to accelerate transition flight testing that is already underway. However, this technical advancement occurs against a backdrop of severe financial distress, with the company reporting a 2024 net loss of £781 million, negative equity of £499 million, and explicit going-concern warnings in its filings. While increased testing could help progress towards the 2028 certification target, it does not address the urgent need for approximately $700 million in additional funding to avoid a likely covenant breach in Q4 2025. Consequently, equity holders remain exposed to high dilution and binary outcomes, with the stock essentially a levered option on certification and financing success in a competitive eVTOL market.

Implication

The doubling of flight test capacity may enable more rapid data collection, potentially de-risking the certification pathway and aligning with management's 2028 target. However, with projected operating cash outflows of ~£100 million in 2025 and a looming covenant breach, the company's survival hinges on securing substantial new capital, which could lead to heavy dilution for shareholders. Equity is structurally subordinated to secured convertible notes and controlled by Mudrick Capital, increasing the likelihood of a distressed recapitalization that could impair common stock value. Progress on flight testing is necessary but insufficient; without a funding solution, technical advances offer little protection against equity wipeout in adverse scenarios. Investors should view this news as a minor positive that does not change the overall high-risk profile, emphasizing the need to monitor funding developments over technical milestones.

Thesis delta

The completion of the final prototype enhances Vertical's flight testing capabilities, which could marginally improve the odds of meeting certification milestones and support the watch item on certification progress. However, this does not materially shift the 'STRONG SELL' thesis, as the core risks of funding shortfalls, negative equity, and dilution remain unaddressed, with equity value still contingent on a binary outcome of securing capital and achieving regulatory approval.