Fisker, the American electric car startup teetering on the brink of delisting, has once again raised alarm bells.
The latest news? They've announced a six-week production halt.
The reason behind the halt is the obvious lack of funds to continue production. To address their cash flow woes, Fisker plans to raise $150 million (approximately 1.08 billion RMB) by selling convertible bonds.
However, this cash injection seems like a drop in the ocean for Fisker, which has already received a delisting warning from the NYSE due to its depressed stock price. The company recently cautioned that it might face cash depletion risks this year.
Once promising to sell cars in China, Fisker now struggles to stay afloat domestically and is on the verge of bankruptcy.
As of now, the stock price continues its downward spiral, plummeting to $0.122 per share, with a market cap of merely $65 million, less than a hundred million. This represents a staggering 99% decline from its peak.
The chill of the new car market has finally reached the United States.
Production halts, inventory clearance, fundraising—Fisker is doing it all.
To stave off impending bankruptcy, Fisker has announced a six-week production halt starting from March 18th.
Apart from alleviating the cash flow crunch, this halt also allows them to adjust inventory levels, thereby advancing their strategic financing plans.
Yes, this embattled newcomer still has a substantial inventory of unsold cars.
Fisker officials stated that they didn't produce any Ocean SUVs (their first mass-produced vehicle) in January this year. However, their production partner, Magna, manufactured approximately 1,000 new vehicles at the Austrian factory from February 1st to March 15th.
Although approximately 1,300 vehicles have been delivered this year, it may seem like demand is exceeding supply. However, there's still a substantial leftover inventory from last year, with around 4,700 vehicles in stock. The total value of these unsold vehicles is over $200 million.
For this year's production, Fisker expects to manufacture between 20,000 to 22,000 vehicles. To achieve this target, they'll require additional financing. Without sufficient funds, they may need to reduce production and potentially lay off employees.
Fisk plans to raise funds by selling preferred convertible bonds at a discount of 10% from the original issue price, with a total proceeds of $150 million (approximately 1.08 billion RMB). According to mandatory filings submitted by Fisk to the U.S. Securities and Exchange Commission (SEC), these bonds will be sold at a discounted price to a Polish investment fund, CVI Investment, which operates through Heights Capital Management. CVI will have the option to convert the bonds into equity in Fisk.
The seemingly life-saving $150 million, however, isn't as easy to come by as it seems. This financing commitment is provided by holders of Fisker's 2025 convertible bonds, to be disbursed in four tranches, contingent upon meeting certain conditions such as submitting the delayed 2023 annual report and continuing negotiations with a major automotive manufacturer for potential investment.
Fisker stated on Monday that it's in negotiations with a major automotive manufacturer regarding potential transactions, including investment, joint development of electric vehicle platforms, and collaboration on production in North America. However, Fisker did not disclose the identity of this major automotive manufacturer or the specific investment amount. This murky collaboration seems to be shrouded in mystery.
Stock price has plummeted by 99%. Fisker's predicament was brought to light a month ago. On February 16th, Fisker officially announced receiving a non-compliance notice from the New York Stock Exchange due to its stock price being consistently below $1. Subsequently, it stated that the company might not be able to continue operations, lacking sufficient funds to sustain operations for the next 12 months.
According to The Wall Street Journal, Fisker has been preparing for a potential bankruptcy, even hiring restructuring advisors to assist. However, Fisker also stated that they currently have sufficient liquidity but deliberately defaulted on $8.4 million in interest payments due on March 15 for bonds maturing in 2026, in order to buy time for negotiations with investors.
As of March 15, Fisker's cash, cash equivalents, and restricted cash balance amounted to $120.9 million, down from $395.9 million at the end of last year. In essence, Fisker isn't at the brink of collapse yet, but its actual financial situation is dire and requires additional capital infusion.
In 2023, Fisker reported a staggering net loss of $463.6 million for the full year and fourth quarter alone, compared to $170 million during the same period in 2022, marking a 2.7-fold increase. Revenue stood at just $200 million, significantly below analysts' expectations of $310 million.
The sharp increase in losses and insufficient revenue can be attributed to poor sales performance. Despite producing over 10,000 units in 2023, Fisker only delivered 4,900 vehicles to customers, less than half of its production volume.
To stimulate sales, Fisker slashed the price of the Ocean last year, with the cheapest version currently priced at around $39,000.
Furthermore, Fisker's stock has been plummeting since the beginning of this year. After going public through a SPAC in 2020, Fisker's stock price reached as high as $32, with a market valuation exceeding $8.8 billion. However, the stock has since plummeted by over 99%, with a market valuation now standing at less than $100 million. Prior to this, the stock had already dropped by 53% and 75% in 2022 and 2023, respectively.
At this point, Fisker is in dire need of a savior, and according to previous reports by Reuters, it seems Nissan might just be the knight in shining armor. Talks have been underway between the two parties regarding potential collaboration.
Sources familiar with the matter have disclosed that the specific terms of the collaboration agreement may entail Nissan investing over $400 million in Fisker's truck platform, developing its own electric pickup, and commencing production of the Alaska electric pickup for Fisker at Nissan's U.S. plant starting from 2026.
However, this statement is merely a feint, and neither party has disclosed the final message.
"I wouldn't even drive this car if they gave it to me for free."
There are reasons provided by officials regarding how Fisker went from being an $8.8 billion publicly traded company to the brink of delisting.
Currently, Fisker only has one electric SUV model for sale—the Fisker Ocean. However, Fisker does not have its own production facilities; instead, it has opted for an asset-light model by outsourcing production.
Magnas is the manufacturing partner responsible for producing the Fisker Ocean, operating at its factory in Graz, Austria. This arrangement presents a challenge as Fisker has stated that logistics in transporting vehicles from Austria to the United States have been a significant obstacle.
After getting the cars manufactured, there's the challenge of selling them, and Fisker ran into some trouble on the sales front. Fisker stated that it couldn't establish the necessary distribution and service network, thus unable to deliver the products quickly to customers.
Like many newly established car manufacturers both domestically and internationally, Fisker initially adopted a direct sales model similar to Tesla's. However, in January of this year, in order to expand its sales and delivery network, Fisker abandoned the direct sales model and shifted towards a traditional dealership model.
The switch to the dealership model marked the unfortunate beginning for Fisker this time around. The company stated that the abrupt transition to a traditional dealership network had an impact on sales and resulted in operational difficulties.
So far, Fisker has signed contracts with six dealerships in the United States, with a goal of having 100 Fisker sales outlets by the end of this year.
Perhaps it's not just the issues mentioned above that have led to such criticism of Fisker. Their performance in terms of core product quality is also questionable. Last May, Fisker's first electric SUV was exposed for having software issues that were expected to take several months to resolve.
Renowned tech blogger MKBHD, after test-driving a Fisker Ocean previously, remarked, "This is the worst car I've ever test-driven," and "Even if you gave me this car for free, I wouldn't drive it."
During his test drive, MKBHD found numerous issues with the car he was reviewing, which hadn't yet undergone the OS 2.0 software update. Problems ranged from malfunctioning smart key, unreliable hill start assist, non-functional solar roof monitoring, to random dashboard warning lights illuminating. Apart from software bugs, MKBHD also criticized some interior design flaws such as the tray table occupying too much glove box space and the multi-functional steering wheel buttons being prone to accidental activation.
Following MKBHD's review video, Fisker promptly rolled out a new OTA update addressing issues like parking electric consumption, smart key functionality, and solar roof features.
Additionally, Fisker Ocean recently faced complaints about brake failure, prompting an investigation by the US National Highway Traffic Safety Administration (NHTSA). Complaints suggested that the Fisker Ocean couldn't switch to park mode or predetermined gear, potentially causing unintended vehicle movement.
Besides product shortcomings, the automotive industry is also experiencing drastic environmental changes.
The demand for electric vehicles is not as strong as it used to be. Although the total sales of pure electric vehicles in Europe and America continued to grow in 2023, the growth rate has significantly slowed down compared to before. Almost overnight, it seems that Tesla is the only brave player left on the international electric racing track. With Toyota leading the way, several international automotive giants have announced delays in their electrification strategies.
SA analyst from The Asian Investor pointed out that the market overestimated the demand for electric vehicles and underestimated the difficulty of expanding production.
Meanwhile, consumer enthusiasm for pure electric vehicles is also waning. The North American Consumer Reports recently released the rankings of consumers' preferred cars for 2024. Among the top 10, six are hybrid models, while only one pure electric model, the Model Y, made the list, with the other three being fuel-powered models.
The current situation faced by Fisker is due to both internal and external factors. With its own challenges, the prospects of entering the Chinese market seem distant, especially in such uncertain circumstances.
