Fisker stock price has collapsed hard in the past few months as the company enters life support amid heightened bankruptcy risks. The stock has plummeted to a record low, giving the EV company a market cap of less than $100 million.

Fisker woes continue

I have warned about Fisker in several articles, as you can read here. The bankruptcy fears were confirmed last week after a report by the WSJ noted that the company was considering filing soon. Fisker denied these allegations and said that it was actively raising funds and talking with a large manufacturer.

Fisker then confirmed that it had raised $150 million and that its talks with the large manufacturer were still ongoing. The rage OEM is likely Nissan, one of the world’s biggest automakers that is interested in Fisker’s pickup business.

Notably, Fisker said that it was shutting its plants for six weeks as it works to align its inventory levels. This argument does not make sense to me since it will lead to more cash burn in the company.

In its statement, Fisker also noted that it had manufactured 1,000 vehicles this year and delivered 1,300 of them. It still has 4,700 vehicles in its inventory that are valued at over $200 million.

There are a few concerns. First, the $150 million cash raise will not be enough to cover Fisker’s cash burn. For example, Fisker had a net loss of more than $463 million. And because of its six-month pause, the company will likely have more cash burn this quarter.

In my estimation, Fisker needs billions of dollars now that its business is incinerating loads of cash every month.

Other potential bankruptcies in the EV industry

MULN vs FSR vs Lion

Fisker is not the only EV company that is struggling and I suspect that other companies will be in the same scenario soon. Remember, even the most capitalized companies like Polestar are having to raise cash to stay afloat. Arrival, a British EV company also recently moved into liquidation.

The first company I believe will go bankrupt soon is Faraday Future, which makes premium SUVs. Faraday Future has an extremely thin balance sheet and its chances of survival are almost nil.

The most recent results showed that Faraday Future ended the quarter with just $6.7 million against a net loss of over $78 million. This is a remarkable downfall for a company that has incinerated over $4 billion in the last decade.

The company has been forced to recall its FF91 for airbag issues. Recalls can be highly expensive, especially for a company that is being evicted from its headquarters. 

The other EV company that could file for bankruptcy is Mullen Automotive. Like Faraday Future, Mullen is running low on cash as it ramps up production. It ended last quarter with about $81.5 million as it reported a net loss of over $64 million. The company will likely continue burning cash in the next few months.

There are concerns about the demand for its small trucks. While Mullen has received huge orders, the reality is that they are all from Randy Marion, a dealer. We need to see actual sales to customers to justify the company’s goal. I suspect that Randy will ultimately reduce its orders as demand slows.

The other EV company that could go bankrupt is Lion Electric, a company that makes electric school buses and trucks. In theory, this company should be doing well now that the Biden administration is pushing schools to move into EVs. The same is true with Democratic cities.

The challenge is that Lion Electric is still incinerating cash. It ended last quarter with over $29.9 million in cash and short-term investments, down from $35.7 million in the previous quarter. The company has raised $142 million in debt and warrants but these ones will not last a long as the cash burn is continuing.

There are other companies that could file for bankruptcy. Some of the most notable ones are Phoenix Motor, Dragonfly Energy, Nikola, and Xos Trucks.

By Crispus Kanyaru

With a keen eye for market trends and a knack for translating complex financial concepts into engaging narratives, Crispus has established himself as a trusted voice in the world of finance. His work has graced the pages of esteemed publications like Benzinga, Forbes, Invezz, and Banklesstimes, reaching a diverse audience eager to navigate the ever-evolving financial landscape. Crispus's journey began with a deep curiosity about the forces shaping the global economy. This natural inquisitiveness led them to pursue a degree in finance and CPIA, equipping them with a solid foundation in financial theory and analysis. But Crispus knew that knowledge alone wasn't enough. He craved to bridge the gap between dry data and real-world experiences, to make finance accessible and relatable to everyone.

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