Fisker shares halted after deal talks with big automaker collapse (updated)

Fisker

25/03/2024 16:27

(Adds background in paragraphs 6,7 and 11)
    By Akash Sriram and Zaheer Kachwala
       March 25 (Reuters) - Fisker's  FSR.N  talks with a large
automaker for a potential deal have collapsed, it said on Monday
amid growing uncertainty for the cash-strapped startup that last
week paused electric-vehicle production.
    Trading in the shares of the company, which did not name the
automaker with which it was in talks, has been halted pending an
announcement.
    The termination of talks has led Fisker to search for
strategic options, including in- or out-of-court restructurings,
and capital markets transactions, the startup said.
    "I can't put it if it is next week or next year, but it is
inevitable," Thomas Hayes, Chairman at hedge fund Great Hill
Capital, said on the growing chances of Fisker likely to file
for bankruptcy protection.
    A potential bankruptcy will make Fisker the second failed
auto startup from Henrik Fisker, who started his career as an
automotive designer and was also a Tesla  TSLA.O  consultant. 
        His previous attempt, Fisker Automotive, fell victim to
the 2008 financial crisis and filed for bankruptcy in 2013
despite  fetching $192 million in loans from the Department of
Energy.
  
        Fisker's latest venture was founded in 2016 and went
public through a merger with a blank-check firm for a valuation
of $2.9 billion. 
  
        But a slew of supply chain issues, production delays and
fundraising hurdles sent its market valuation crashing to less
than $100 million.
  
    Reuters had earlier this month reported that Japanese
automaker Nissan  7201.T  was in advanced talks to invest in the
startup.
    
    STRUGGLES TO RAISE FUNDS    
  
    Fisker said on Monday it will be unable to meet a closing
condition related to its attempt to raise up to $150 million by
selling convertible notes after missing an interest payment.
    The $8.4 million payment for some notes due in 2026 was
supposed to be paid on March 15, but the startup said it did not
pay despite having enough liquidity as it wanted to use the
30-day grace period to talk to investors about its capital
structure.
    Raising funds has been hard for loss-making EV startups,
which have little by way of revenue as they struggle to ramp up
production and deliver to customers amid strong competition and
a tough economy.
    Separately, Fisker said it would ask investors to vote on a
proposal for a reverse stock-split at a shareholder meeting on
April 24, as it looks to comply with the New York Stock
Exchange's listing norms.
    Fisker's shares have lost more than 90% of their value this
year, after the startup flagged going-concern risk in February
and paused investments in future projects until it secured a
partnership.
    It pivoted to a dealer-partner model earlier this year,
after delivering less than half of the vehicles it made in 2023
due to logistics issues.
    Fisker has pursued a different strategy from Tesla and other
EV startups by relying on auto supplier Magna to assemble its
vehicles rather than invest the capital to build and operate a
factory on its own.
    The Fisker Ocean competes with Tesla's Model Y SUV, and a
growing crowd of mid-size electric SUVs such as the Ford Mustang
Mach-E.

 (Reporting by Zaheer Kachwala and Akash Sriram in Bengaluru and
Joe White in Detroit; Editing by Shilpi Majumdar and Arun
Koyyur)
 ((Zaheer.Kachwala@thomsonreuters.com;))