Thursday – Canaccord Genuity adjusted its stance on Lilium N.V. (NASDAQ:LILM), downgrading the stock from Buy to Hold and slashing the price target to $0.70 from $1.85. The downgrade follows the German Federal Government’s failure to provide a promised €50M state loan through the German State Development Bank (KfW). This decision impacted Lilium’s financial strategy, as the company was also counting on a matching €50M from the State of Bavaria, contingent on the federal government’s commitment.
The unexpected blockage of the loan by the Green Party in the Bundestag came after Lilium’s first-half 2024 financial results, where management had expressed optimism about the loan’s approval. The loan’s importance was underscored by the company’s statement that it would need to significantly cut costs or reduce operations if the loan was not received. The combined €100M in funding had gone through a thorough due diligence process before being halted.
This development is particularly surprising given the verbal assurances from German Chancellor Olaf Scholz and Federal Transport Minister Volker Wissing, who had indicated governmental support for the electric vertical takeoff and landing (eVTOL) manufacturer.
Following the setback in Berlin, Lilium disclosed in a 6-K filing that negotiations with Bavaria over its €50M commitment are ongoing. However, the outcome is uncertain, especially in light of Bavarian Minister-President Markus Soder’s comments regarding the decision, which do not suggest a favorable resolution for Lilium.
InvestingPro Insights
The recent downgrade of Lilium N.V. (NASDAQ:LILM) by Canaccord Genuity aligns with several InvestingPro metrics and tips that highlight the company’s financial challenges. According to InvestingPro data, Lilium’s market cap stands at $384.89 million, with the stock trading near its 52-week low. The company’s financial health appears precarious, as evidenced by an adjusted operating income of -$352.22 million for the last twelve months as of Q2 2024.
InvestingPro Tips indicate that Lilium is “quickly burning through cash” and that “short term obligations exceed liquid assets,” which explains the critical importance of the now-blocked government loan. The company’s unprofitability is further emphasized by the tip stating that “analysts do not anticipate the company will be profitable this year.”
These insights underscore the gravity of the loan denial and its potential impact on Lilium’s operations. Investors seeking a more comprehensive analysis can access 14 additional InvestingPro Tips for Lilium, providing a deeper understanding of the company’s financial position and market performance.
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