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Wednesday, May 22, 2024

flyExclusive starts trading, creates Kinston’s first non-bank public company

Kinston-based charter-flight operator flyExclusive began public stock trading last week after completing its combination with a New York special purpose acquisition company.

Shares closed at $6.85 on the first day of trading after opening at $11.98 per share. Shares traded as low as $3.71 earlier in the day. On Tuesday afternoon, shares were trading for about $6.

SPAC company EG Acquistion’s deal with flyExclusive was announced in October 2022 with an estimated equity value of $600 million at the time. The company’s market capitalization after the first day of trading is about $500 million, founder and CEO Jim Segrave says.

“Today marks another milestone in our company’s mission to elevate the private aviation experience,” Segrave said in a release. “We built flyExclusive around the value that minutes matter for our customers, and this principle will continue to guide the disciplined approach that has defined our success in the industry.”

In a Linkedin post, Segrave said the IPO is “a testament to our dedicated team, loyal customers, and the unwavering support that has fueled our journey.”

Company executives were pleased with the offering despite the declining share price, which Segrave blamed partly on pressure in the past few weeks from New York Stock Exchange officials that required flyExclusive to create more trading liquidity. Segrave owns 75% of the company’s shares, while EG officials also control a significant percentage. They have agreed not to sell shares for at least three years.

“They told me that without any float, the stock would be incredibly volatile and the short sellers would be able to manipulate the price,” Segrave said in an interview Thursday night.

In response, flyExclusive agreed to convert 2 million warrants, which each had a cost basis of about 18 cents per share, into 400,000 common shares to facilitate more public trading. Segrave says his investment bankers believe the investors who owned the converted warrants immediately sold their shares Thursday, making instant profits but creating downward pressure on the stock.

Segrave noted that about 30% of the investors in EG Acquisition converted to flyExclusive shares, compared with about 10% in most SPAC deals. “That’s the best SPAC performance in at least two years. We smoked it,” he says. Under SPAC rules, investors are able to redeem their shares for the amount of their investment until the IPO is launched.

Segrave launched flyExclusive in 2015 after selling his Segrave Aviation to Delta Air Lines in 2010. It offers flights and fractional ownership in about 100 light, mid- and supermid-sized jets. It employs 755 people, including about 400 in Kinston, a Lenoir County town of 19,000 where it provides maintenance services.

Segrave’s great-uncle, Felix Harvey III, was a Kinston businessman with many investments and among the founders of Global Transpark, where flyExclusive is based. While Harvey led a publicly owned bank, flyExclusive is believed to be the first non-financial publicly traded  company based in Kinston, Segrave says.

“FlyExclusive has become one of the fastest-growng providers of premium private jet charter experiences thanks to their world-class leadership team, business model designed to maximize utilization and flight unit economics, and the consistent high-quality service they provide to customers,” Gregg Hymowitz, CEO and director of EG Acquisition Corp. said in a release

EG Acquisition is a “blank-check” company that raised $225 million when it went public in 2021. It was among hundreds of similar SPAC businesses started between 2020 and 2022, whose investors trusted veteran investors such as Hymowitz or celebrities such as Alex Rodriguez to buy promising businesses.

It was typically a faster process than traditional public offerings, while SPAC owners often made optimistic projections about the prospects of their business, Bloomberg News reported this week.

Unfortunately, many SPAC firms have had financial problems with at least 21 filing for bankruptcy this year, prompting losses of more than $46 billion based on their peak market valuations, Bloomberg reported. Those insolvencies included office leasing firm WeWork, electric scooter company Bird Global and Charlotte-based Sunlight Financial, which provides financing for solar power installations.

About 110 post-SPAC firms were trading for less than $1 as of November, Bloomberg noted.

FlyExclusive is the fifth-largest U.S. charter/fractional private jet operator. Peers Surf Air, Jet.AI, and Volato have also had IPOs this year. Chamblee, Georgia-based Volato, which offers charter service on HondaJets that are made in Greensboro, started trading in early December at $13.75. It closed Thursday at $3.69.

Segrave has said his lengthy experience in the aviation business and flyExclsuive’s operating model makes it a more financially promising company than its peers.

FlyExclusive forecasts revenue of $323 million this year, and a net loss of $27.6 million. Next year, revenue is expected to soar to $497 million, with a net profit of $6.8 million. Massive IPO costs affected this year’s results, Segrave told the Private Jet Card Comparisons newsletter.

After working on the transaction for more than a year, Segrave expressed relief that the IPO had finally happened. “I feel like I was in a championship fight, I got beat up and it was a battle to get through. The New York Stock Exchange does their job, and I have no complaints, but it just about beat me to death.”

David Mildenberg
David Mildenberg
David Mildenberg is editor of Business North Carolina. Reach him at dmildenberg@businessnc.com.

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