Shares of Martin Aircraft Company Ltd (ASX: MJP) are back on investors' radars today with the shares soaring as much as 44.4%. They hit a high of 65 cents which also marked a 71% increase since the beginning of the week.
Martin Aircraft is a highly speculative stock. The company itself is based in New Zealand and has developed a practical jetpack – the "Martin Jetpack" – which can be flown either manned or remotely. It plans to commercialise these jetpacks with the initial models designed for First Responder units; for instance, fire departments as well as search and rescue.
A recent article by the Financial Times profiling the company and its Jet pack was picked up by world media organisations, likely increasing interest in the company.
The machines are expected to retail for around US$200,000 each when they are released to the market, while enhancements will cost customers even more.
Earlier this month, the company announced that the formal production of the Martin Jetpack would begin in June. It said "It is always an exciting moment for a company when it watches its first product roll off the commercial assembly line, especially when that product has taken more than 30 years to evolve from concept to reality."
It's certainly an exciting concept and one that could prove to be revolutionary. As such, it's perhaps not surprising that the shares are climbing so strongly this week. In saying that, however, there are also some key risks that need to be addressed.
To begin with, there is the obvious fact that Martin Aircraft is still cash flow negative. It is yet to record any receipts from customers, as highlighted by its recent quarterly report. It still had $36.48 million of cash on hand at the end of March, but it certainly needs to start generating some cash soon or else investors could start to lose confidence.
There's also various regulatory hurdles to overcome which could certainly hinder the company's ability to sell to certain customers, or restrict it from entering entire regions.
Personally, I still see Martin Aircraft as being too risky to invest in today, although I will certainly be watching with anticipation from the sidelines.
