Fisker's bonds have experienced a significant increase in yield, pushing its price to a mere 11 cents on the dollar, amidst financial struggles and setbacks, including missed revenue targets, substantial losses, delayed production forecasts, internal control weaknesses, dwindling cash reserves, looming convertible debt obligations, and broader industry challenges impacting investor confidence.
The FSR 2.500 15-Sep-2026 USD (US33813JAA43) bond has seen a drastic increase in its yield, skyrocketing by 1066 basis points to 116.6% over the past week, pushing its price to a mere 11 cents on the dollar.
In November 2023, Fisker saw a dramatic drop of over 20% in its stock value, rattling investor confidence in the electric vehicle manufacturer. The decline followed a series of setbacks that highlighted challenges within the company. Financially, Fisker reported third-quarter revenue of $71.8 million, falling short of analysts' expectations. The company also recorded a larger-than-anticipated loss of $91 million, further contributing to the investor apprehension surrounding its performance. One significant blow was Fisker's decision to revise its 2023 production forecast downward, aiming for a range of 13,000-17,000 units. The rationale behind this move was to streamline its global delivery and logistics operations, addressing ongoing issues in getting vehicles to customers promptly. This adjustment came after Fisker produced 4,725 vehicles but delivered only 1,097, underscoring the delivery challenges faced.
Compounding investor concerns was the delay in submitting Fisker's Form 10-Q to the Securities and Exchange Commission (SEC). Initially postponed due to the appointment of a new chief accounting officer, the filing was further deferred as the company uncovered "material weaknesses" in its internal financial controls. These weaknesses were attributed to the intricate nature of accounting practices across different countries, involving elements such as convertible notes, derivatives, and managing inventory within its vehicle manufacturing contracts.
Currently, the company faces approximately $1.7 billion in remaining liabilities, with its cash position sharply declining from $1.4 billion in 2021 to $500 million today. Notably, Fisker is significantly behind its initial projections from 2020, facing at least a year's delay.
A critical issue plaguing Fisker is its heavy reliance on convertible debt, particularly concerning are the looming obligations of $324.5 million due in 2025 and a hefty $667.5 million due in 2026. The company's dwindling cash reserves, coupled with the expensive nature of ramping up EV production, exacerbate its financial predicament.
As the electric vehicle (EV) industry grapples with challenges, Fisker's stock faced a further blow when shares of EV stocks dropped. The decline was attributed to the Federal Reserve Chair's statement indicating a cautious approach to cutting interest rates, causing concerns about the prolonged period of higher rates. This has a direct impact on EV companies, which heavily rely on customers financing their purchases. In a higher interest rate environment, selling EVs becomes more challenging, particularly for companies like Fisker that are already grappling with financial constraints.
Adding to the complexity is Fisker's ambitious goal to expand its market, particularly in Germany, Europe's largest market for electric vehicles. However, this expansion comes at an inopportune time as EV sales in Germany are projected to decline, attributed to factors such as inflation, high car costs, and the cancellation of government EV subsidies. With the German EV market facing a rollback of 14%, Fisker finds itself in a challenging position, especially when pitted against established competitors like Volkswagen and Tesla.
Fisker remains unrated by credit agencies, adding to uncertainties surrounding its creditworthiness.
Fisker, Inc. is an automotive company known for its technology-driven sustainable electric cars, offering a range of comprehensive services such as vehicle maintenance, direct sales, financing, ect. Established in 2016 by Henrik Fisker and Geeta Gupta-Fisker, the company is based in Manhattan Beach, CA. Fisker has a market capitalization of €361 million as of February 5, 2024.