Direct Selling (DSAQ) to Combine with Hunch Mobility in $223M Deal

Direct Selling Acquisition Corp. (NYSE:DSAQ) has entered into a definitive agreement to combine with urban air mobility company FlyBlade India, known as Hunch Mobility, at an enterprise value of $223 million.

Hunch Mobility is an urban air mobility platform dedicated to providing short-distance air mobility services in India.

The combined company is expected to trade on the NYSE under the symbol “HNCH” once completed in 2024.

Transaction Overview

Direct Selling brings about $63 million into the deal through its current trust and expects to supplement this with a $12 million PIPE.

The transaction does not include a minimum cash condition, but does include capital commitments of $20 million from DSAQ’s sponsor.

The $20 million investment includes $10 million of equity purchases in DSAQ subject to non-redemption and $3 million in the form of promissory notes convertible into convertible preferred shares to be funded in three equal monthly installments.

The first of these is to come as a $1 million promissory note being issued at signing followed by $7 million of convertible preferred shares that will be funded at the closing of the transaction.

Hunch’s backer, Hunch Ventures, has committed to investing $3 million in the form of convertible preferred shares.

In connection with the transaction, Hunch Mobility’s shareholders are rolling 100% of their existing equity into the combined company and are expected to own approximately 52%.

The sponsor is expected it to take a 19.9% stake in the combined company while DSAQ shareholders are expected to own 15.9% and the PIPE investors 4.2%. Antara investment shares and Antara convertible preferred shares will each represent 3.5%, and Hunch Ventures convertible preferred shares will take 1%.

In addition, the company will solicit the vote of registered holders of warrants to adopt an amendment to the warrant agreement. This amendment will provide that, effective immediately prior to the effective time, each warrant will automatically convert into 1/5 of one DSAQ Class A Share with no fractional shares being issued if less than five warrants are held.

Quick Takes: Hunch Mobility spreads its wings alongside a squadron of eVTOL trailblazers. But, it may have gained an early start through its joint venture with de-SPAC Blade (NASDAQ:BLDE) as it aims to utilize this to target the market in India.

While eVTOL de-SPAC predecessors such as Horizon (NASDAQ:HOVR), Joby (NYSE:JOBY), Archer (NYSE:ACHR), and Lilium (NASDAQ:LILM) have focused primarily on markets in North America and Europe, Hunch Mobility intends to tap into the Indian market early enough to lead the transition to urban air mobility.

The company plans to do this within the next five years by leveraging its partnership with Blade Urban Mobility, which combined with Experience Investment, where it will use its technology, customizable for Indian operations, and hopefully unlock economies of scale.

The two sides already have a licensing agreement and strategic partnerships with transportation service providers to provide efficient booking and concierge services.

Hunch Mobility sees an opportunity in the bustling landscape of Indian urban congestion, where deadlocks are estimated to cost the country $22 billion annually. And as India gears up to become the third-largest economy by 2027-2028, Hunch Mobility is eyeing the burgeoning middle-class demographic, projecting an addressable market of 20 million flyers by 2027.

Hunch Mobility has already flown about 1,626 flights with a 43% repeat flying rate, establishing its presence in India’s Maharashtra and Karnataka provinces. It is now looking to expand on this by rolling out its services throughout different regions of the country over the coming years, fueled by the support of India’s Ministry of Civil Aviation.

Similar to many of the other eVTOL companies targeted by SPACs in the past, Hunch Mobility has existing strategic relationships in place with other airline companies. It has signed MoUs with Eve Air Mobility, Beta Technologies, Skyports, and Jaunt Air Mobility to help develop its aircraft capabilities.

Hunch Mobility is also drawing on its engagement with non-scheduled operators. Through this, it can acquire and lease aircrafts to customers and other third parties, while also allowing it to take advantage of certain fiscal incentives offered by India such as the Special Economic Zone.

By utilizing the Special Economic Zone, Hunch Mobility could gain advantages including 100% profit linked deduction for 10 years on capital gains tax, friendlier borrowing rates and other tax incentives.

Looking ahead, the company plans to bring in $22 million in revenue this year from about 15,000 flyers, but anticipates this will jump to $437 million by its fifth year of operations with approximately 235,000 annual flyers.

In terms of EBITDA, Hunch Mobility expects to be negative until the second year of its rollout plan in India, which is targeted at $1 million. But, by year five, it projects a 25% margin with $110 million in EBITDA.

Getting to profitability is something that its JV partner Blade has so far struggled to do consistently since closing its 2021 SPAC deal in its own home geography of US east coast cities, although it reported an EBITDA profit of just under $1 million in the third quarter of 2023.

Like Blade, Hunch Mobility is hoping to pull in revenue from multiple business segments including an urban air mobility platform for religious and air ambulance needs as well as a lifestyle concierge platform that includes a rewards program.

However, for the company to reach the break-even point on each flight, it must sell a minimum of three seats out of the five to six available. Selling five seats would yield a 34% margin, equating to a $81 profit for each flight. Needless to say, the outcome will significantly hinge on Hunch Mobility’s partnership with Blade and its ability to capitalize on India’s fiscal incentives for cost reduction.

For the full investor presentation, click here.

ADVISORS

• Company
  • Cohen & Company Capital Markets, a division of J.V.B. Financial Group, LLC, is acting as Hunch Mobility’s exclusive financial advisor and lead capital markets advisor.
  • Ellenoff Grossman & Schole LLP is acting as Hunch Mobility’s U.S. legal counsel.
  • Arthur Cox LLP is acting as Hunch Mobility’s Irish legal counsel.
  • Khaitan & Co is acting as Hunch Mobility’s Indian legal counsel.
  • Peregrine Communications is acting as public relations advisor to Hunch Mobility.
• SPAC
  • Kirkland & Ellis LLP is serving as DSAQ’s U.S. legal counsel.
  • Cyril Amarchand Mangaldas is serving as DSAQ’s Indian legal counsel.
  • McCann FitzGerald LLP is serving as DSAQ’s Irish legal counsel.