Fisker heads toward bankruptcy

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Fisker Inc., an electric vehicle (EV) manufacturer, is facing severe financial difficulties and is on the brink of bankruptcy. The company has signaled that it may seek bankruptcy protection within the next 30 days due to a critical shortage of funds and inability to meet its debt obligations.

Financial Struggles

Fisker's financial woes have been escalating throughout 2024. The company has been unable to secure sufficient capital infusion despite negotiations with major automakers and other potential investors. As of mid-April, Fisker reported having only about $54 million in cash and equivalents, with an additional $11.2 million in restricted cash. This amount is insufficient considering the company's current financial obligations, including a missed $8.4 million interest payment due in March, which it failed to make even within a 30-day grace period.

Operational Challenges

The company has also faced significant operational challenges. Fisker has already reduced its workforce significantly, from 1,560 employees at the end of 2021 to 1,135 as of last week, and plans further layoffs. Production issues, particularly with its Fisker Ocean SUV, have compounded its troubles. The vehicle has been subject to criticism for quality issues and is under investigation by the National Highway Traffic Safety Administration for multiple safety concerns.

Market Response

The market has reacted negatively to Fisker's financial health, with its stock price plummeting. The company was delisted from the New York Stock Exchange due to its financial instability and failure to meet listing standards. This has further eroded investor confidence and limited its ability to raise funds through equity.

Potential Outcomes

If Fisker fails to secure new funding or reach an agreement with its creditors, it may have to file for Chapter 11 bankruptcy protection. This would allow the company to reorganize its debts but would also signify a significant downturn in its operations and could potentially lead to liquidation if reorganization fails. In summary, Fisker Inc. is in a precarious position with dwindling cash reserves, operational challenges, and a rapidly closing window to avoid bankruptcy. The next few weeks will be critical for the company as it seeks to secure a financial lifeline and stabilize its operations.
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