Fisker Inc. (NYSE:FSR) is an American electric vehicle automaker founded by Henrik Fisker and his wife Geeta Gupta-Fisker. They launched in 2016 and are based in Southern California. Henrik Fisker is a famous automotive designer, best known for designing the BMW Z8, Aston Martin DB9, Aston Martin V8 Vantage and his latest endeavour, the Fisker Karma and Ocean.

Fisker stock has a strong backing by many as investors pick a side early on in the EV battle. Other notable names are NIO and Tesla. Tesla is the household name for EV vehicles, but many believe Fisker or NIO will be big competition in the near future.

The Fisker Ocean

SPAQ (SPAC)

Fisker became a publicly traded company, listing itself on the market through a SPAC (Special Purpose Acquisition Company). What is a SPAC? A special purpose acquisition company is an entity with no commercial operations that is formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company. This acquired company does not need to then go through their own IPO process, which can be a slow process, especially if the company wants to sell shares to raise capital quickly. Although SPACs have been around for decades, they became very popular in the second half of 2020, with many investors pouring into rumours about what companies SPACs were acquiring. One that raised lots of attention was Spartan Acquisition Corp (SPAQ). They merged with Fisker, changing the stock name to FSR. After the deal was complete, the stock ran from just under $9 to $23 in one month.

Chart provided by TradingView

How is Fisker set up for the future?

Fisker currently has no recorded profits. But, they have November 2022 scheduled to have cars being delivered from production lines. FY2022 deliveries are planned at 4,000 units and FY2023 for 45,000 units.

The Q2 earnings showed EPS of -$0.16, Cash and Cash Equivalents of $962M and no debt. Morgan Stanley issued a target of $40. This boosted the stock in the short term, but the price fell as investors were cautious about Fisker raising $625M in convertible bonds. The bonds will pay 2.5% per year, semi-annually beginning on March 15, 2022. The maturity date is set for September 15, 2026, unless earlier converted, redeemed, or repurchased.

Long term value

I like Fisker for the long term potential. It’s an opportunity to be in the same situation as Tesla was before the pandemic. Tesla was at $200 per share with the current share structure, and now is $733. Fisker is on schedule for production and delivery, which is often the main hurdles for car manufactures especially in the start up stage. They are strapped for cash, but this could be a caution to look out for.

Risk to note

The bonds mentioned earlier “will be convertible under certain circumstances into cash, shares of Fisker’s Class A common stock … or a combination thereof, at Fisker’s election.” This could see the shares diluted and create negative pressure on the price.

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