Fisker’s talks with major car manufacturers have failed
On Monday, Fisker announced that talks with an unnamed car manufacturer about a strategic partnership had been cancelled. The potential partner was reportedly Nissan. The reason for the breakdown in negotiations is not known, but the consequence is: the end of the talks has prompted the company to “look for strategic options, including in-court or out-of-court reorganisations and capital market transactions”.
In light of the failed investment, the New York Stock Exchange has suspended trading in Fisker shares and plans to delist the electric car manufacturer due to the “unusually low” value of its shares. Fisker shares had closed at a price of 0.13 dollars on Friday and were trading at 0.09 dollars on Monday before the halt.
As Reuters writes, in the event of a delisting, Fisker must offer to repurchase its unsecured 2.50% convertible bonds due 2026 and an event of default will be triggered for its senior secured convertible bonds due 2025. Without external funding, which should come from the partner in the automotive industry among others, it is very unlikely that Fisker will be able to finance this buyback. This is also stated by the company itself: “We do not currently have sufficient cash reserves or financing sources sufficient to satisfy all amounts due under the 2026 Notes or the 2025 Notes, and as a result, such events could have a material adverse effect on our business, results of operations and financial condition,” the statement reads.
It has been known for weeks that the financial situation was extremely tight. Not only did Fisker fall well short of its original delivery targets for 2023, it also questioned its own future when presenting its financial figures at the beginning of March. Such a statement is mandatory for listed US companies if current resources are insufficient to cover operations for the next twelve months. After this warning to investors, companies often still have time to find investors and turn things around.
In the case of Fisker, however, this has now become less likely. The potential partnership with a major car manufacturer, which would also include an investment, was mentioned in the presentation of the balance sheet. However, it became known in the middle of the month that Fisker was also preparing for possible insolvency with the help of lawyers. The biggest alarm signal came a few days later, however, when production of the Ocean was stopped at Magna in Graz. Officially, the six-week production pause was intended to “equalise stocks”. However, in view of the known financial situation, there were already fears at the time that Fisker might not have enough money to continue contract manufacturing. In January, not a single copy of the Ocean had been built. If production of the only model and sales driver is interrupted, this emphasises the seriousness of the situation.
The US stock market is now firmly expecting a Fisker insolvency, with only speculation about the timing. “I can’t put it if it is next week or next year, but it is inevitable,” Reuters quotes Thomas Hayes, chairman of hedge fund Great Hill Capital.
Fisker Inc. was founded in 2016 and went public via a SPAC merger – with a valuation of 2.9 billion dollars. Fisker Inc. is the second automotive company founded by Henrik Fisker. The first company, Fisker Automotive, had developed a range extender saloon. However, the company did not survive the 2008 financial crisis and was declared insolvent in 2013 despite millions in loans from the US government and a sale to investors.
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