One of the most-troubled electric vehicle (EV) stocks in the market, Fisker (OTCMKTS:FSRN) has certainly been hit hard by a range of secular and company-specific headwinds. Yesterday, FSR stock fell to an all-time low before trading was suspended by the New York Stock Exchange. The NYSE is also delisting the company due to “abnormally low” prices.
Additionally, news that talks with an unnamed “major automaker” have ended suggests that any sort of lifeline for the company is now out of the question. With this in mind, investors appear to be preparing for a total loss of value, as bankruptcy is increasingly the only option for the embattled EV maker.
Of course, companies can come out of bankruptcy and it’s not guaranteed that existing investors will lose everything. Shares will now trade over-the-counter (OTC). But there does appear to be more pain ahead for Fisker.
Let’s dive into what to make of the news.
FSR Stock to Be Delisted Amid Bankruptcy Concerns
With few options seemingly left for Fisker, it does appear investors’ concerns around bankruptcy are credible. Without a lifeline from another automaker or some investment that’s off the balance sheet, the company will probably need a major restructuring to stay viable. With $1.3 billion of debt, limited cash reserves and a share price it can’t leverage to any degree, Fisker will have trouble securing any additional financing.
What’s more, with Fisker stock delisted from the NYSE, the company will be required to repurchase its unsecured 2.5% convertible notes due 2026. This will further exacerbate its cash flow issues and likely result in a default.
That’s really too bad, considering the company’s brand and unique vehicles once made it appear to be a viable competitor in the mid-range electric SUV market. However, in an EV market with lower demand and higher competition, many short sellers have been proven correct in betting on a continued downfall for highly indebted companies that haven’t moved quickly enough out of the gate.
Fisker will continue to evaluate its strategic alternatives and I wouldn’t rule out some sort of deal with creditors to keep it afloat for some time. That said, at this point, shares don’t look like a prudent bet for those who value capital preservation.
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On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
