Story ID: 
Wheels Up Stock Nose Down
By: Mark Huber
Caption: Wheels Up stock is now unmistakably nose-down, trading at $1.06 per share on October 11.
Word Count: 1064
The trajectory of Wheels Up after the company went public in July 2021 via a special purpose acquisition company (SPAC) paints a cautionary tale. Initially valued at up to $2.7 billion and $11.80 per share, Wheels Up stock is now unmistakably nose-down, trading at $1.06 per share on October 11, a price that gives the company a market capitalization valuation of just $259 million. Concurrently, the company’s earnings per share (EPS) over the last 12 months is a negative $1.30. 

Stocks that trade at less than $5 per share and have a market capitalization of less than $300 million are widely viewed as highly-speculative “penny stocks,” and Wheels Up appears to have firmly arrived in that category. Stocks that trade at less than $1 for more than 30 days on the New York Stock Exchange are subject to delisting. 

All this is occurring even though Wheels Up is posting record revenues, steadily increasing its membership base, and has been on an acquisition tear since 2019. The price of this rapid growth is clear: concerning cash burn, record losses, and a significant churn in the executive suite. CEO Kenny Dichter is fond of comparing his company’s growth model to that of Amazon.com, which posted deficits for nine straight years before turning a profit. The difference between the companies, other than the scale of course, is that Amazon’s losses were sustained by ever-hopeful investors who continued to propel the company’s stock price upward. Wheels Up’s stock is performing more traditionally, in line with what one would expect from a company that could be poised to lose up to 33 cents on every dollar it takes in this year. In September, Dichter told Yahoo Finance that he was unconcerned about the company’s stock price, reciting the famous line from the 1989 baseball fantasy film Field of Dreams, “If you build it, they will come.” 

But will they pay enough, soon enough to make the company profitable? When asked about the plunge in company stock value and its plans for the future by AIN, a Wheels Up spokesman replied with the following written statement via e-mail, “As demand continues to rise at unprecedented levels for our industry, we’re continuing to build a first-of-its-kind tech-enabled marketplace to better serve our members and remain the leading private aviation provider.” The company declined to make Dichter available for comment and will not hold its customary media breakfast at this year’s NBAA-BACE later this month in Orlando. 

With membership growing to 12,667 in Q2 of this year, up from 10,515 just a year ago, and 1,500 available aircraft, there is no question that the company has built a fleet and attracted an audience since its inception in 2013. Revenue this year could top $1.5 billion, up from $300 million four years ago. In Q2 2022, revenue grew to $425 million, up 50 percent year over year. Similarly, live flight legs were up 20 percent from the year-ago period and prepaid block sales grew to $330 million, up 180 percent from the year-ago period. 

But that growth has come at a price. According to the company’s June 30 Form 10-Q filing with the Securities and Exchange Commission (SEC), Wheels Up has an accumulated deficit of $902 million. Its cash position decreased from $784 million to $426 million in the first six months of 2022. Losses for the period from operations increased from $52.4 million to $186 million and the company is expected to post a Q3 loss in the area of another $100 million. Nevertheless, new CFO Todd Smith recently said that he is hoping that the company will turn a profit by 2024. 

Smith, who joined Wheels Up in June from GE is one of several high-profile fresh faces in the company’s executive suite. They include Rob Cords, hired as executive vice president of fleet operations in July, Stevens Sante-Rose who was appointed “chief people officer” in January, and Vinayak Hegde, who joined the company as “chief marketplace officer” in May of 2021 after tenures with Amazon and Airbnb, and was promoted to president of Wheels Up in October 2021. The new executives joined the company as Wheels Up continued its aggressive campaign of industry acquisitions and are charged with integrating the parts and pieces into a cohesive organization. 

Over the last five years, Wheels Up has made significant acquisitions and combinations. On June 3, 2019, it acquired Elkhart, Indiana-based Travel Management Company and the company’s owned and leased fleet of 26 Hawker 400XP aircraft; in December 2019, it merged with Delta Private Jets, acquiring its fleet of 70 managed aircraft in a deal that would eventually see Delta as the owner of 112 million shares of Wheels Up stock, making it the company’s largest institutional investor; on March 2, 2020, it acquired Gama Aviation, the operator of Wheels Up’s fleet of King Airs and Citations; and in November 2021, it acquired Mountain Aviation, including its fleet of Citation X aircraft. This year to date, Wheels Up has acquired Scottsdale-based Alante Air and its fleet of 12 Cessna Citation CJs for $15.5 million; UK-based Air Partner, a global company that provides “private jet, group, and freight charter and aviation safety & security solutions to industry, commerce, governments, and private individuals, across civil and military organizations” for $109 million; and made a $10 million investment in Tropic Ocean Airways, a Florida-based company that operates a fleet of float-equipped Cessna Caravan turboprops. 

In recent months, Wheels Up has taken measures to improve the customer experience while boosting revenues, continuing to aggressively invest in technology, hiring 350 new pilots, adjusting pricing including the institution of a fuel surcharge, and requiring its Core members to deposit at least $400,000 if they want to fly immediately. The moves have encouraged some stock analysts to classify the company’s stock as a “buy” with at least one projection of a share price increase to $7 and revenues approaching $3 billion by 2026.   

But there has been a spate of insider selling in the meantime, according to Form 4s filed with the SEC year-to-date. On February 8, chief business officer Jason Horowitz sold 341, 869 shares for $3.63 each and another 88,136 shares for $2.14 each on August 24; Eric Jacobs, then the CFO, sold 444,461 shares on February 8, also for $3.63 each; and Dichter, who owns more than 14 million shares and continues to receive large stock awards as part of his compensation package, disposed of 301,836 shares for $2.14 each on August 24. 

Institutional investors including Delta Airlines, Goldman Sachs, Vanguard, and Northern Trust now own 57 percent of the company.