How the once most promising EV maker went from bottom to top

On Monday, Fisker became the latest all-electric vehicle startup to file for bankruptcy protection under Chapter 11 amid weak consumer demand, a severe cash crunch and operational and product problems.

For investors, this has been uncertain for some time, since Fisker issued a warning in February about its potential as a company, which led to its charismatic founder and CEO Henrik Fisker disappearing from social media and the spotlight.

This is the latest in a series of collapses of electric vehicle companies. Other companies backed by special purpose acquisition companies, or SPACs, have also filed for bankruptcy protection. The list includes companies such as Proterra, Lordstown Motors and Electric Last Mile Solutions. Nicola And Faraday Future Amid operational challenges, missed targets, and broader industry challenges, they remain in business but trade at less than $1 per share.

It’s also a bit of a nostalgic moment, as this is the second car company from Henrik Fisker, both of whose companies are branded with his last name, and who has filed for bankruptcy protection.

This new filing comes after Fisker Company failed to secure an investment from a major automaker. Nearly four years ago, Fisker announced plans to go public through a reverse merger with an Apollo-backed SPAC that valued the company at $2.9 billion. The deal brought in more than $1 billion in cash for Fisker.

Like many other companies at the time, Fisker benefited from low interest rates and a Wall Street boom over EVs following the emergence of a U.S. electric vehicle leader. Tesla,

“They looked at Tesla’s success, and found that Tesla was more of an anomaly than an example,” said Sam Abuelsamid, principal research analyst at Guidehouse Insights.

But consumer acceptance of EVs has been slower than expected, costs have risen and investor interest in EVs other than Tesla has waned. The company faced significant problems in its operations as well as the launch of its first product, called the Ocean SUV EV.

When it went public via a SPAC in 2020, Henrik Fisker compared the company to US EV leader Tesla. He also touted its production relationship with a Canadian auto supplier MagnaCompare this with the relationship between Apple and Foxconn.

The automaker, unlike most of its competitors, contracted with a third-party manufacturer to build the Fisker Ocean crossover. The partnership with Magna was considered an “asset-light” strategy, as Fisker described it, to allow the company to save cash and focus on differentiated technologies such as software.

Abuelsamid said such a strategy is not inherently bad, but he called the company’s management inept and pointed the finger at Gita Gupta-Fisker, the company’s chief financial officer and chief operating officer, who is also Henrik Fisker’s wife.

“This approach can be made to work,” he said. “The problem with Fisker, which I underestimated, was … the incompetence of senior management.”

The company burned through cash and last month recalled thousands of Ocean SUVs in North America and Europe because of problems with the vehicle software.

According to the company’s Chapter 11 filing, it owes millions of dollars to software and engineering companies such as Adobe, SAP Americas, Manpower Group and Prelude Systems, among others. NBCUniversal, the parent company of CNBC, is also listed as a top lender.

“(The auto industry) is capital intensive. You’re trying to match production, consumer demand and when they have any kind of issue with the vehicle, they have to allocate funds for that,” said Stephanie Valdez Streety, director of industry insights at Cox Automotive. “Plus when they don’t have other revenues like (internal combustion engines) to fund it … it becomes very challenging.”

Its operating unit, Fisker Group Inc., has estimated assets of $500 million to $1 billion and liabilities of $100 million to $500 million.

At the end of last year, Fisker had stock worth $530 million, as it had sold only 4,700 of the more than 10,000 Ocean EVs it planned to produce in 2023.

This is a nod to Henrik Fisker, the renowned automotive designer credited with designing the BMW Z8 and Aston Martin DB9.

His eponymous first company — Fisker Automotive — filed for bankruptcy protection in 2013, shortly after he left the company. It later sold its assets to China’s Wanxiang Group for $150 million.

Things were expected to be better the second time around for the founder, who said he had learned lessons from the mistakes he made with his previously bankrupt company.

“I’ve done this before, so I’m now in a unique position where I can apply the lessons learned, which is very rare, especially in the car industry,” he said in 2017, a year after starting the new company.

But the similarities between the two failed companies are hard to ignore.

Both companies were heavily hyped, primarily as Fisker himself claimed they would revolutionize the industry. They were boosted by “free” money – first federal funds, more recently Wall Street – on the premise that “green” or electrified vehicles were the future of the auto industry.

Both suffered from significant quality issues that led to recalls. The first Karma manufactured by Fisker was recalled in 2011 due to battery safety issues and fire risks.

Both companies also changed their direction and priorities several times.

Fisker seconded in January, turning to a dealership-based distribution model after delivering less than half of the more than 10,000 vehicles it produced through a direct-to-consumer approach similar to Tesla’s model.

But there was a key difference this time. With the second Fisker’s failure, its investors, rather than U.S. taxpayers, were left out. While Henrik Fisker’s first company was boosted by a $529 million federal loan — $139 million of which the government lost — the second company was funded through Wall Street’s bullishness on SPACs and EVs. Its stock was delisted in April.

A Fisker spokesman said in a statement Tuesday morning that the company is “proud of its accomplishments” but believes Chapter 11 is the best option.

“Like other companies in the electric vehicle industry, we have faced a number of market and macroeconomic challenges that have impacted our ability to operate efficiently,” the spokesperson said in a release. “After evaluating all options for our business, we determined that moving forward with a sale of our assets under Chapter 11 is the most viable path forward for the company.”