Surf Air Mobility Lists Shares, Giving Hope That a Key Venture Exit Door Is Reopening

Surf Air Mobility, a venture-capital-backed aviation and air travel company, listed shares on the New York Stock Exchange via a direct listing, the latest sign that the market for initial public stock deals is gaining momentum after being at a near standstill for the past 18 months. 

Surf Air’s stock closed at $3.15 a share Thursday, after opening at $5 a share, down from its reference price of $20 set Wednesday. Founded in 2013, Los Angeles-based Surf Air offers charter flights on private planes.

Surf Air’s stock-market debut under the symbol SRFM comes on the heels of initial public listings by a handful of companies including last week’s initial public offering by Oddity Tech, the parent of direct-to-consumer beauty brand Il Makiage. Oddity shares were up about 40% in its initial trading. 

Despite Surf Air closing 84% lower than the reference price, the resurgence of the market for private companies to list shares publicly would be welcomed by venture-capital investors who have been without one of the primary ways that they cash out of their investments. 

There have been 68 U.S. IPOs priced this year through July 27, a 26% increase from the same period last year, according to data firm Dealogic. 

“The broadening of the market gives us comfort that the bear market might be behind us, and with it the broadening interest in public markets for high growth private companies,” said John Frankel, the founding partner of New York City-based firm Ff Venture Capital. The firm first backed Surf Air in 2014 with a $1 million investment and is still a stakeholder, Frankel said. 

In a direct listing, a company floats its existing stock onto a public exchange without raising any money or using underwriters. In contrast to a traditional IPO, existing shareholders including venture firms aren’t typically required to hold on to shares for a specified period before selling, which could allow venture firms an immediate liquidation event.

To be sure, the market for public listings is far from where it was. The U.S. IPO market hit a peak in the second quarter of 2021 when companies raised roughly $44 billion over 115 IPOs, according to Dealogic. The market hit a low in last year’s fourth quarter when U.S. companies raised $1.4 billion over 10 listings.

“We still find the market to be muted from a venture-capital perspective,” Ernst & Young U.S. venture-capital leader Jeffrey Grabow

Still, the recent spate of public listings are glimmers of hope, he added. 

Driving the improved sentiment are U.S. stocks that have marched toward new 52-week highs, easing inflation and an increase in speculative bets made by investors, Grabow said.

Surf Air’s business has faced challenges. Since it was founded, the company has incurred significant losses, including a net loss of $20.6 million for the first three months of this year, according to public-listing paperwork filed with the Securities and Exchange Commission. 

The company has funded its operations primarily with various debt instruments, convertible securities and preferred and common share financing arrangements, according to the filing. It said that it expects to incur significant expenses and continuing losses for the foreseeable future.  

In 2020 Surf Air acquired private charter marketplace BlackBird Air to expand beyond its fixed schedule model and offer on-demand charters in which customers can be matched with third-party planes and pilots.

Surf Air conducted 1,696 on-demand charter flights during 2022, which were recognized as revenue on a gross basis, according to the SEC filing. Surf Air conducted 1,093 on-demand charter flights in 2021.

In 2022, Surf Air canceled a special-purpose acquisition company deal with Tuscan Holdings Corp II that would have been worth $1.4 billion. 

Write to Marc Vartabedian at [email protected]