Ever since Martin Aircraft Company Ltd (ASX: MJP) hit the ASX boards in February 2014 after floating at 50 cents per share the stock has been on a wild ride comparable to those likely offered by its piloted jetpack flying machines.
In early March the stock soared to an incredible $3.15 before crashing back down to earth to sell for $1.34 today, around triple the IPO valuation.
What then has generated such excitement about the company's potential?
Shooting for the stars
The IPO raised $25 million to help the company promote and commercialise its piloted jetpacks that are designed to have over 30 minutes of flight capability at speeds of up to 74 km/h and altitudes up to 1,000 metres.
The initial plan is to deliver the first jetpacks to customers in 2016, with fire service, police, ambulance, surf lifesaving and search and rescue organisations all targeted as potential customers for the jetpacks.
And pigs might fly?
The idea of emergency services using flying jetpacks was once the realm of science fiction, but the possibility of robo-cop style arrivals at the local pub on a Friday night is coming closer according to Martin Jetpacks.
Although, the company is yet to receive a single signed order from a single customer.
So far the company only has an aviation permit to fly its jetpacks in New Zealand and there is a risk the jetpacks are unable to meet flight safety standards in other countries. This scenario would likely leave the jetpacks and their investors grounded for a long while yet.
Can it take off?
The company estimates the cost of a jetpack will be around US$200,000 plus customisation, and aims to sell them globally with a focus on the large US and Australian markets. It also has one other iron in the fire that may be tempting investors along for the ride.
It's no secret that unmanned aerial vehicles (UAVs) or drones have a big future, with the company reporting that cumulative spending on drones over the next decade is estimated to reach US$98 billion.
Much of that spending is by the American military, although global defense spending on aerial robiotics is also expected to explode in the years ahead and the unmanned drone-type business may be a more promising sales avenue for the company than the piloted jetpacks.
The company is developing its Martin Skyhook unmanned aerial vehicle to meet this market and says the unmanned aerial vehicle has potentially multiple commercial and military uses.
The company hosted some powerful visitors from the US congress at its Christchurch headquarters in March and will no doubt have been keen to impress on its guests the operational advantages of its jetpacks over traditional modes of transport.
This may sound exciting but it's notable that Martin Jetpack has a formidable competitor in the US nation's own research and development programs, while other private competitors are also likely to develop their own jetpack designs.
Should you buy?
Selling for $1.34 the company is ascribed a market valuation around $234 million, which suggests investors are already betting the company has a good chance to commercialise either its manned or unmanned aerial vehicles.
There is undoubtedly blue sky potential, although two directors have not waited long to dump some of their own shares in the business. This is not a good look for a newly listed business, especially when one of the sellers is the founding director.
At today's price the risk / reward ratio seems unfavourable and I suspect some of the heat will come out of the valuation. Investors who believe in the company's potential to commercialise its aerial vehicles will likely be able to pick stock up at a better valuation in the future, although that's no guarantee of avoiding a crash landing.
Another recently listed business to generate investor excitement is medical marijuana business Phytotech Medical Ltd (ASX: PYL), although it also looks to have a long road ahead of it before claiming success.
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