Cathie Wood, the founder and CEO of Ark Invest who has gained fame for her big and sometimes controversial bets on disruptive innovation stocks, has invested another $2 million in electric air taxi startup Joby Aviation – a company that is losing money “hand over fist” according to CNBC host Jim Cramer.
On Tuesday, Wood’s Ark Autonomous Technology and Robotics ETF (ARKQ) purchased 323,028 additional shares of Joby, bringing Ark’s total position to 2.29 million shares valued at $14.6 million. This represents a 1.45% portfolio weighting in the high-risk, high-reward fund.
The move highlights Wood’s long-term vision for Joby and confidence that electric vertical take-off and landing (eVTOL) aircraft can transform urban transportation. However, the capital-intensive sector faces turbulent skies ahead in the short-term with no guarantee of commercial viability.
Joby is Pioneering Electric Air Taxi Technology but Rackings Up Losses
Joby Aviation aims to make emission-free electric air taxi service affordable and accessible through revolutionary aircraft design and manufacturing techniques.
The California-based startup describes their piloted eVTOL service as “as easy to hail as an Uber and as affordable as its Pool option.” This could allow consumers to practically fly across cities while bypassing traffic congestion.
Joby has an electric air taxi prototype but no paying customers yet.
However, the world of air taxis still remains essentially science fiction. Joby has yet to transport a single fare-paying passenger despite over a decade in development. Their futuristic aircraft today exist only as prototypes costing $10 million each.
And building an electric airline from the ground up requires massive capital investment in research, design, certification, manufacturing, infrastructure and more.
As a result, Joby Aviation reported in November a whopping $93 million net loss last quarter excluding special expenses. Revenues remain negligible with no services sold besides a U.S. Air Force partnership.
Joby is typical among eVTOL startups with sky-high spending and no profits. Competitor Archer Aviation (ACHR), another top holding of Cathie Wood, lost $167 million last quarter alone.
Such financials caused CNBC stock commentator Jim Cramer to emphatically declare investors should “sell, sell, sell” money-losing Joby.
Cathie Wood Sees Long Term Potential Despite Losses in Near Term
Yet high losses today do not inherently negate a company’s long term potential in Cathie Wood’s eyes. Her investment strategy deliberately identifies innovation ahead of financials.
As an early leader among eVTOL developers with 85% of US air safety certification plans accepted, Joby enjoys first-mover advantage. Their pilots have already test flown an production-intent prototype over Miami, San Francisco and Los Angeles to demonstrate its aerial agility.
Plus the US Department of Defense sees strategic value in advancing American air taxi capabilities. In September, Joby delivered the first of nine prototype aircraft to the US Air Force under a $131 million research contract.
Joby delivered a prototype eVTOL aircraft to the U.S. Air Force, a major validation of their technology. Credit: U.S. Air Force photo by Tech. Sgt. John McRell
This highlights both military and civilian applications for Joby’s electric aerial ridesharing platform. Ark likely views Joby as well-positioned given adequate capitalization.
At current cash burn rates, Joby holds over $1 billion to sustain operations for years without additional funding. Developing revolutionary aircraft and services takes time and money.
Cathie Wood has proven willingness to endure paper losses for disruptive innovation potential, even when facing criticism.
Ark Previously Backed Other Leaders Who Lost Money Before Profitability
Tesla (TSLA) represented Ark’s largest holding for years while Elon Musk’s electric automaker had negligible profits. Today, Tesla is one of the world’s most valuable car makers.
Ark also accumulated shares in money-losing Netflix (NFLX) for over a half-decade before streaming content went fully mainstream. Now Netflix earns billions in annual profit.
In both cases, the pioneers endured losses upfront to disrupt legacy auto and entertainment while chasing scale needed for profitability. This same blueprint could apply for Joby Aviation in air transit.
Hence, an incremental $2 million ticket for Joby further diversifies Ark’s evolving portfolio of transformative mobility companies. Losses today may convert to upside exposure should the electric airline model take flight commercially as automous technology improves.
Cathie Wood recognizes investing in future innovation inherently carries risk of failure. Not every breakthrough succeeds. But accrued profits across winning bets offset select speculative losses over time.
With aircraft development progressing swiftly, regulators reviewing certification plans, demonstrational test flights captivating attention and capital reserves still robust, Joby Aviation appears well-positioned as an emerging air taxi leader for Ark’s high risk investor appetite.
