Surf Air moves ahead on going public via direct listing

Surf Air Mobility Inc. is moving ahead with its plan for a direct listing, the first significant company since 2021 to venture the alternative route to becoming publicly traded.

The filing Monday by the regional air travel company confirmed an earlier report by Bloomberg News that it was working with Morgan Stanley on the listing. Located at the Hawthorne Municipal Airport in the Los Angeles area, Surf Air is planning for its shares to trade on the New York Stock Exchange under the symbol SRFM. 

After the listing and a combination with Southern Airways Corp., co-founder Liam Fayed will remain the largest shareholder with an 8.7% stake, followed by co-founder Sudhin Shahani with 7.3%, according to the filing.

Surf Air had a net loss of $20.6 million on revenue of $5.5 million for the first three months of 2023, according to its filing with the US Securities and Exchange Commission. That compared with a net loss of $10.6 million on revenue of $4.8 million in the same period the previous year.

With Southern Airways included, the combined business had a loss of $15.2 million on revenue of almost $28 million on a pro forma basis during the first quarter of this year, according to the filing.

Surf Air is working to pioneer hybrid electric and fully electric powertrains in aircraft. It warns, though, that those plans could face difficulties or even fail.

The company said last year that it had confidentially submitted a draft with US regulators for a direct listing in the wake of a collapsed blank-check merger that would have taken it public at a $1.42 billion valuation. 

In a direct listing, companies typically don’t raise fresh capital and existing investors can usually begin selling shares on the first day of trading without the lockup period restrictions of an traditional initial public offering. Because banks don’t underwrite shares as they do in an IPO, direct listings also can save on banking fees and the time spent on an investor roadshow.

Despite widespread interest, direct listings have been used by only a handful of well-known companies, such as Spotify Technology SA, Slack Technologies Inc. and Coinbase Global Inc. Most recently, eyewear retailer Warby Parker Inc. went public via a direct listing in September 2021.

Amid the past year’s dearth of new equity offerings in the wake of a record high in 2021, Nasdaq Inc. and New York Stock Exchange won approval in December to loosen restrictions on capital raises in direct listings, a move that will make them more competitive with IPOs as the market picks up.