Fisker Fear: Lots of Back and Forth Over Liquidity Drops Stock Value

Another EV startup is facing challenges over short seller claims the company’s funding is not as it appears. Fisker Automotive is fighting back on news its large war chest has legal restrictions making it inaccessible. The company says it had around $800 million in reserves on September 30. Fisker’s stock value plunged five percent after short seller Fuzzy Panda Research’s findings saw daylight.

What issues does the Fisker report show?

Fisker Ocean
Fisker Ocean | Andrej Sokolow/picture alliance via Getty Images

Fuzzy Panda’s report focuses on two issues that some interpret as deceptive. One is that the funds the company claims to have are actually bank guarantees for costs at Magna International. Magna is a giant parts manufacturer with 2021 revenues of over $36 billion. It looks like 2022 will beat that figure.

The second issue claims that over 80 percent of the Ocean was actually an EV jointly designed by a Chinese auto company and Magna. The claim centers on sources from both Fisker and Magna. But the company has issued a statement rebutting those claims.

What does Fisker say?

Fisker
Henrik Fisker stands with the Fisker Ocean | Mario Tama/Getty Images

“Fisker Inc. does not have a bank guarantee with Magna, and Fisker owns the intellectual property for the Fisker Ocean platform,” it says. “The Ocean platform does not have 80 percent carryover parts from any other platform.” Fisker also says it has sent a cease-and-desist letter to Fuzzy Panda Research. 

Fuzzy Panda’s last EV startup report was for Electric Last Mile. It filed for bankruptcy this past June. Similar short seller reports have made the rounds for Lordstown Motors and Nikola. For Nikola, its founder, Trevor Milton, was found guilty of fraud last month. But Lordstown began manufacturing its EV pickup last week.

Right now, Fisker is beginning production of its first vehicle, called Ocean. So access to capital is crucial at this juncture. Actually, access to cash is always crucial, if for no other reason than to give an impression of stability should the economy or other factors affect the company’s production timelines. 

What are the reserves for?

Fisker Ocean
Fisker Ocean all-electric SUV | Mario Tama/Getty Images

But without being able to dip into those cash reserves due to restrictions on its use, if true, could hurt the company’s future attempts at attracting more investments. Fuzzy Panda’s report centers on what those reserves are there for. It says they’re a guarantee to Magna for payment of its Fisker EV work. 

Magna is handling the production of the Ocean. It has already invested in tooling, a production line, and other manufacturing costs. Fisker has guaranteed about $2,500 per car to Magna, which includes its margins, according to CNBC. Fisker claims it will produce over 42,000 Ocean EVs in 2023. For comparison, Rivian will build around 15,000 trucks this year, its first full year of production. 

Fuzzy Panda says that Fisker has resorted to issuing at-the-market or ATM stocks, to keep the company propped up. Issuing ATMs means the more there is, the more it dilutes existing stock values. The company is looking to raise $2 billion in this way to continue in business. So far, it has raised $118 million in ATMs last quarter. 

So far in Friday, December 2 trading, the company’s stock has bounced back five percent, subtracting losses from the day before.