EV maker Fisker faces liquidity questions after short seller claims its cash is “tied up”

Electric car startup Fisker is going through new liquidity questions after a brief vendor’s report Thursday claimed the corporate’s funds are “tied up.”

Fisker says it has loads of money, about $824 million as of Sept. 30. But undisclosed authorized restrictions might imply the EV startup cannot entry a lot of that money hoard, forcing it to concern new inventory to lift funds, quick vendor Fuzzy Panda Research wrote within the report.

Shares of Fisker fell about 5% following the report’s launch on Thursday.

According to the report, a lot of Fisker’s money steadiness is tied up through financial institution ensures on behalf of Magna International, the auto elements big that started constructing Fisker’s Ocean SUV underneath contract final month. The report additionally alleges the design of the Ocean relies on that of an electrical SUV that Magna designed with a Chinese automaker, with not less than 80% of elements carried over. The report cites unidentified former staff of Fisker and Magna as its sources.

Fisker strongly denied the report’s key allegations.

“Fisker Inc. does not have a bank guarantee with Magna, and Fisker owns the intellectual property for the Fisker Ocean platform,” the automaker stated in a press release after the U.S. markets closed on Thursday. “The Ocean platform does not have 80 percent carryover parts from any other platform.”

Fisker stated it has despatched a cease-and-desist letter to Fuzzy Panda, and that it’ll “take immediate and aggressive action” to handle the quick vendor’s “false and misleading claims.”

Access to money is essential for any automaker. Between manufacturing unit tooling and engineering prices, bringing a brand new mannequin to market can price a billion {dollars} or extra — and far of that complete needs to be spent earlier than a single new car ships. Established automakers typically preserve money reserves of $10 billion or extra to make sure that they will proceed to carry new merchandise to market if a recession takes a chew out of their income.

For a startup like Fisker, a money reserve is essential to its success. With a possible downturn looming, that money has supplied some consolation to its traders. But if the corporate cannot entry it, that consolation could possibly be fleeting.

Fuzzy Panda estimates not less than $790 million of Fisker’s money is pledged to make sure that Magna is paid for manufacturing unit tooling, manufacturing prices and its contractually assured margins, a complete of about €2,700 ($2,840) per car. Fisker stated final month that it expects to construct 42,400 Oceans by the tip of 2023.

Because of the ensures, the quick vendor wrote, Fisker has been pressured to make use of “at-the-market” inventory choices to proceed funding its operations as an alternative of tapping its money.

In an “at-the-market” providing, or ATM, an organization points new shares and sells them through the open market, on the prevailing value. Fisker filed a registration assertion with the Securities and Exchange Commission in May that permits it to lift a complete of $2 billion from ATMs over time.

Fisker stated it raised $118 million through ATMs within the third quarter, however Fuzzy Panda added the EV maker might want to elevate “significantly more cash” through that facility.

The report cites quite a few indicators that Fisker has been transferring to preserve money since early in 2022, together with a be aware that the corporate’s employee-lunch program was “downgraded from high-end salads to mostly pizza.” (Fisker stated in a press release it’s “happy that we can continue to offer our employees lunch at a time when many startups are struggling.”)

Fuzzy Panda stated it has a brief place in Fisker’s shares. The agency beforehand printed related stories about Electric Last Mile Solutions, which filed for chapter in June, and Ohio-based electrical van maker Workhorse Group.