SCHEDULE: Mudrick Capital Boosts Vertical Aerospace Stake

Mudrick Capital Management has agreed to purchase an additional $35 million in convertible notes from Vertical Aerospace Ltd., alongside a shareholder agreement that will adjust board representation.

Summary

• Mudrick Capital Management, through various funds, has entered into a term sheet to purchase an additional $35 million of convertible senior secured notes from Vertical Aerospace Ltd.
• This purchase is part of a larger $100 million financing package, with $15 million already purchased since April 20, 2026.
• The convertible notes will be issued under an amended indenture, changing the conversion price from $3.50 to $1.30 per ordinary share.
• A shareholder agreement will be executed, increasing the size of Vertical Aerospace's board to nine directors, with Mudrick Capital gaining nomination rights based on its ownership percentage.
• The company also plans to issue $25 million in Series A Convertible Preferred Shares to Yorkville Advisors Global, LP.
• Existing employee options will be repriced to $1.30 per share, and a new management option pool will be created.
• Mudrick Capital has waived its participation rights in a $35 million common equity offering by the company.
• The transactions are subject to further negotiation and definitive agreements, with a target closing date of August 12, 2026.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a moderately positive development, indicating continued financial support and strategic alignment from a key investor, though it involves significant restructuring and potential dilution.

Positives

• Secures significant additional funding of $35 million in convertible notes from a key investor, Mudrick Capital.
• The new conversion price of $1.30 per share for convertible notes may incentivize future equity conversion.
• Increased board representation for Mudrick Capital suggests continued strategic alignment and confidence.
• Yorkville Advisors Global, LP's participation with $25 million in preferred equity provides further financial backing.
• Repricing of employee options and creation of a new option pool aims to align management incentives with company performance.
• Waiver of participation rights in a common equity offering by Mudrick Capital indicates a commitment to the current financing structure.

Negatives

• The conversion price of $1.30 per share represents a significant decrease from the previous $3.50, potentially indicating a lower valuation or expected future share price.
• The issuance of preferred shares to Yorkville Advisors Global, LP could lead to future dilution for common shareholders.
• Mudrick Capital's increased board influence may shift corporate governance dynamics.
• The overall financing package involves complex debt and equity instruments, which can add financial complexity.
• The company is still reliant on significant capital raises, suggesting ongoing financial needs.

Risks

• The company's ability to meet its financial obligations is dependent on the successful completion of these financing transactions.
• Future dilution for existing shareholders is a risk due to the conversion of notes and preferred shares.
• Changes in board composition and governance rights could impact strategic decision-making.
• The success of the company's operations and its ability to generate sufficient returns to service debt and equity obligations remain critical.
• The term sheet is subject to further negotiation and definitive agreements, meaning the transactions could still fall through.

Future Outlook

The company is securing significant financing through convertible notes and preferred equity, with a revised conversion price for notes and repricing of options. The shareholder agreement aims to stabilize governance by increasing board size and granting nomination rights to Mudrick Capital. The success of these transactions is crucial for the company's future operations and financial stability.

Management Comments

• Mudrick Capital Management, L.P. has agreed in principle to purchase the remaining $35,000,000 Additional Notes.
• The Company and Mudrick Capital have agreed to enter into a shareholder agreement with respect to certain governance matters.
• The Company shall use commercially reasonable efforts to facilitate the removal by the transfer agent of all restrictive legends from the Ordinary Shares currently owned by Mudrick Capital or its affiliates by the Closing Date.
• The Company shall take all necessary action to duly call, give notice of, convene and hold an Annual or Extraordinary General Meeting of the shareholders of the Company as promptly as possible following the Execution Date (and in any event by September 15, 2026) to vote on the Articles Amendments.

Industry Context

StockSavvy.ai notes that this financing and governance restructuring is typical for companies in the aerospace sector facing capital-intensive development cycles and seeking to solidify investor confidence. The adjustment of conversion prices and board representation reflects a dynamic negotiation between a significant investor and the company to ensure continued support while aligning interests.

Comparison to Industry Standards

• The conversion price adjustment from $3.50 to $1.30 per share is a significant change, often seen in distressed financing scenarios where investor confidence needs to be rebuilt. Competitors in the eVTOL space may have different financing structures, but such significant price adjustments are less common in stable, well-capitalized companies.
• The governance changes, granting specific board nomination rights to Mudrick Capital, are more pronounced than typical passive investor relationships. While strategic partnerships often involve board seats, the detailed formula for nomination based on ownership percentage is a specific mechanism.
• The overall financing package of $100 million (including existing and proposed notes, preferred equity, and potential common equity) is substantial for a company at this stage, reflecting the high capital requirements of the advanced air mobility sector.

Corporate Governance

Related Party Transactions

• Mudrick Capital Management, L.P. and its affiliated funds are purchasing $35 million in additional convertible notes from Vertical Aerospace Ltd.
• Mudrick Capital Management, L.P. has already purchased $15 million in convertible notes since April 20, 2026.
• Yorkville Advisors Global, LP is set to purchase $25 million in Series A Convertible Preferred Shares from Vertical Aerospace Ltd.

Stakeholder Impact

• Shareholders: Potential for future dilution from convertible note conversion and preferred share issuance. Increased board representation for Mudrick Capital may influence strategic decisions. Option repricing aims to align management with shareholder interests.
• Creditors: The new financing structure, including convertible notes, adds to the company's debt obligations.
• Employees: Existing options will be repriced to $1.30, and a new option pool is being created, potentially increasing long-term incentive alignment.
• Management: Will have repriced options and a new option pool, aligning their incentives with the company's performance and the new capital structure.

Next Steps

• Negotiation and execution of definitive agreements for the transactions by August 12, 2026.
• Execution of the Shareholder Agreement.
• Execution of the Amended Securities Purchase Agreement.
• Execution of the Fourth Supplemental Indenture.
• Amendment to the Certificate of Designations for Series A Convertible Preferred Shares.
• Company to call and hold a shareholder meeting by September 15, 2026, to vote on Articles Amendments.
• Company to hold a shareholder meeting by January 31, 2027, to approve management option pool and repricing.
• Completion of the transactions, including the issuance of convertible notes and preferred shares.

Key Dates

Recommendation

The filing indicates a significant capital raise and governance restructuring, which are necessary for the company's continued operations. However, the substantial dilution potential from the revised conversion price and preferred equity, coupled with the company's ongoing capital needs, warrants a cautious 'hold' stance. While the continued support from Mudrick Capital is positive, the path to profitability and value creation remains uncertain.

Keywords

Vertical Aerospace, Mudrick Capital, Convertible Notes, Financing, Shareholder Agreement, Board of Directors, Capital Raise, Preferred Equity