Electric vehicle startup Fisker Inc. has announced a temporary halt in the production of its Ocean SUV, revealing it is in urgent need of financial support. The pause, expected to last six weeks, comes as the company disclosed having only $121 million in available funds as of March 15, with $32 million of this sum restricted or not readily accessible.
Financial Crunch Hits Hard
This financial revelation was part of a regulatory filing made public on Monday, signaling a critical juncture for the company, which raised concerns about its ability to continue operations without securing additional funds. This announcement follows a February statement where Fisker hinted at the possibility of facing such financial distress.
Since going public in 2020 through a merger with a special purpose acquisition company, Fisker has encountered a series of challenges:
- Issues with Ocean SUV launch including software problems and customer service inadequacies
- National Highway Traffic Safety Administration investigations into rollaway and braking system problems
In an attempt to reduce expenses, Fisker announced a 15% reduction in its workforce, approximately 200 employees, in February.
How is Fisker Managing Its Inventory and Sales?
Despite these hurdles, Fisker managed to deliver 1,300 vehicles in January and February, with an existing inventory of about 5,000 units across the U.S. and Europe. This was out of 10,000 vehicles produced by its contract manufacturing partner, Magna Steyr, though only half of these were shipped in 2023.
Fisker’s financial struggles are exacerbated by a shift in sales strategy from direct sales to dealer partnerships, a move met with mixed success as at least one early dealer partner has already severed ties. Adding to the turmoil, The Wall Street Journal recently disclosed Fisker’s engagement with restructuring advisers to explore a potential bankruptcy filing.
Seeking Solutions Amidst Financial Challenges
Operating in the costly automotive manufacturing sector, Fisker’s cash reserves significantly depleted by approximately $200 million over the last 11 weeks, with Magna producing no vehicles in January and only 1,000 since February. This decline followed the company’s reported $326 million in cash at the end of 2023.
In a bid to stabilize its financial standing, Fisker disclosed ongoing negotiations with an automaker, rumored by Reuters to be Nissan, for a potential investment partnership. Concurrently, the company is attempting to raise $150 million through the sale of convertible notes to an undisclosed investor. This arrangement, however, is pending and contingent upon meeting various conditions, with funds to be disbursed in $35 million segments.
Fisker’s financial disclosures were accompanied by an admission of a delay in filing its annual 2023 results, including a missed 15-day extension period from the Securities and Exchange Commission (SEC) that expired on March 15. This delay triggered a default in one of the company’s convertible notes agreements, although the default has been waived by the investor. Nevertheless, the investor retains the option to convert the remaining amount on the note, which exceeded $300 million as of late January, into shares, introducing further uncertainty into Fisker’s financial landscape.
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Featured Image courtesy of Kyle Grillot/Bloomberg Finance LP