Form 4: FlyExclusive Inc. Secures $25 Million Investment from EnTrust Global and EG Sponsor LLC

FlyExclusive Inc. receives a $25 million investment through a securities purchase agreement involving Series B Convertible Preferred Stock and warrants.

Summary

• Gregg Hymowitz, a director and 10% owner of FlyExclusive Inc., along with EG Sponsor LLC, EnTrust Global Management GP LLC, and GH Onshore GP LLC, filed a Form 4 detailing changes in beneficial ownership.
• On August 8, 2024, EnTrust Emerald (Cayman) LP purchased 20,408 shares of Series B Convertible Preferred Stock and a warrant to purchase 4,000,000 shares of Common Stock for $20,000,000.
• EG Sponsor LLC committed to purchase 5,102 shares of Series B Preferred Stock and a warrant to purchase 1,000,000 shares of Common Stock for $5,000,000, no later than August 15, 2024.
• Each share of Series B Preferred Stock has a stated value of $1,000 and is convertible into 200 shares of Common Stock.
• The Series B Preferred Stock will automatically convert into Common Stock on the earlier of December 31, 2025, or the closing date of a subsequent capital raise exceeding $25,000,000.
• The warrants are exercisable from the date of issuance until the fifth anniversary of the issuance at a price of $0.01 per share.

Sentiment

Score: 7

Explanation: The sentiment is positive due to the successful capital raise, but tempered by potential dilution and the company's need for future funding.

Positives

• FlyExclusive Inc. successfully raised $25 million in capital.
• The investment includes both preferred stock and warrants, potentially providing future upside.
• The conversion terms of the preferred stock could lead to increased common stock ownership.
• The warrants have a low exercise price of $0.01, making them attractive if the stock price increases.

Risks

• The Series B Preferred Stock will automatically convert into Common Stock on the earlier of (i) December 31, 2025 and (ii) the closing date of a subsequent capital raise in excess of $25,000,000, which may dilute existing shareholders.
• The warrants, if exercised, will further dilute existing shareholders.

Future Outlook

FlyExclusive is positioned to use the $25 million investment for future growth and operations. The company may seek additional capital raises in the future.

Industry Context

This investment reflects continued interest in the private aviation sector, with investors seeking opportunities in companies offering premium travel experiences. Similar investments have been made in other private aviation companies, indicating a positive outlook for the industry.

Comparison to Industry Standards

• Comparable companies in the private aviation sector, such as NetJets and Wheels Up, have also attracted significant investment.
• Wheels Up went public via SPAC and has faced challenges in achieving profitability, highlighting the risks in this sector.
• NetJets, owned by Berkshire Hathaway, represents a more established and financially stable player in the industry.
• The terms of this investment, including the use of preferred stock and warrants, are common in private placements for growth companies.

Related Party Transactions

• The transaction involves Gregg Hymowitz, who is a director and 10% owner of FlyExclusive Inc., as well as affiliated entities such as EnTrust Emerald (Cayman) LP and EG Sponsor LLC.

Stakeholder Impact

• Shareholders may experience dilution upon conversion of the Series B Preferred Stock and exercise of warrants.
• The investment provides FlyExclusive with additional capital to support its operations and growth, potentially benefiting employees and customers.
• The company's financial stability may improve, benefiting creditors and suppliers.

Next Steps

• EG Sponsor LLC to complete the purchase of Series B Preferred Stock and warrants by August 15, 2024.
• FlyExclusive Inc. to utilize the $25 million investment for growth initiatives.
• Potential future capital raises to trigger the conversion of Series B Preferred Stock into Common Stock.

Key Dates