Electric car maker Fisker faces liquidity issues after cash freeze lawsuit

Henrik Fisker stands next to the Fisker Ocean electric car after it was unveiled at the Manhattan Beach Pier ahead of the Los Angeles Auto Show and AutoMobilityLA on November 16, 2021 in Manhattan Beach, California.

Patrick T. Fallon | AFP | Getty Images

Electric car launch fisker faced new liquidity problems after a report by a short seller on Thursday the company’s funds are “tied”.

Fisker says he has a lot of money, about $824 million as of September 30th. But undisclosed legal restrictions could mean the EV startup can’t access much of that cash reserve, forcing it to issue new shares to raise funds. The study is written in report.

Fisker shares fell about 5% after the release of the report on Thursday.

According to the report, the majority of Fisker’s cash is tied up with bank guarantees on behalf of Magna International, the auto parts giant, which began production of the contracted Fisker Ocean SUV last month. The report also claims that the design of the Ocean is based on that of an electric SUV co-developed by Magna with the Chinese automaker, with at least 80% of the parts carried over. Unidentified former employees of Fisker and Magna are cited as sources in the report.

Fisker flatly denied the report’s key claims.

Fisker Inc. does not have a Magna bank guarantee and Fisker owns the intellectual property of the Fisker Ocean platform,” the automaker said in a statement after the US markets closed on Thursday. “The Ocean platform does not have 80 percent parts carried over from any other platform.”

Fisker said it has sent a cease and desist letter to Fuzzy Panda and will take immediate and aggressive action to respond to “false and misleading statements by the short seller.”

Access to cash is critical for any automaker. With factory tooling and engineering costs, bringing a new model to market could cost a billion dollars or more, and much of that amount must be spent before a single new vehicle is released. Established automakers typically maintain cash reserves of $10 billion or more to ensure they can continue to bring new products to market if a recession cuts into their profits.

For a startup like Fisker, having a cash reserve is critical to its success. With a potential downturn looming, this money has provided some consolation to investors. But if the company can’t access it, that comfort may be fleeting.

Fuzzy Panda estimates that at least $790 million of Fisker’s cash is pledged to ensure Magna is paid for factory tooling, manufacturing costs and contractual guaranteed margins, for a total of around €2,700 ($2,840) per vehicle. Fisker said last month that it plans to build 42,400 Ocean ships by the end of 2023.

Because of the guarantees, the short seller wrote, Fisker was forced to use stock offerings “in the market” to continue funding its operations instead of using its cash.

In an “on the market” or ATM offering, the company issues new shares and sells them on the open market at the prevailing price. In May, Fisker filed a registration statement with the Securities and Exchange Commission, allowing it to raise a total of $2 billion from ATMs over time.

Fisker said it raised $118 million through ATMs in the third quarter, but Fuzzy Panda added that the electric car maker would need to raise “significantly more money” through the facility.

The report cites a number of indicators that Fisker has been looking to save money since early 2022, including a note that the company’s employee lunch program has been “downgraded from high-end salads to predominantly pizza.” (Fisker said in a statement that he is “excited that we can continue to offer lunch to our employees at a time when many startups are struggling.”)

Fuzzy Panda stated that it has a short position in Fisker shares. The firm has previously published similar reports on Electric Last Mile Solutions, which filed for bankruptcy in June, and an Ohio-based electric van maker. group of workhorses.

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