What happened
Shares of Fisker (FSRN 129.31%) fell as much as 15% on Tuesday after the electric vehicle manufacturer announced plans to sell $350 million worth of additional shares into the market. The move comes just weeks after company officials implied they would not have to go to market with additional shares, and it likely caught investors off guard. As of 11 a.m. ET today, shares were still down 14%.
So what
Fisker is one of a number of electric vehicle start-ups attempting to bring an automobile to market. The company hopes to begin production of its Ocean SUV before year's end, but will need money to do it.
Image source: Fisker.
On Tuesday, the company moved to raise at least some of the capital it needs. Fisker announced it has entered into an at-the-market distribution agreement with J.P. Morgan Securities and Cowen to raise up to $350 million. Fisker said the proceeds would be used to continue development of its "Personal Electric Automotive Revolution" including additional vehicle development, retail development, and general corporate purposes.
The raising of new funds isn't a surprise, but the method the company is using is. On the May 4 post-earnings call, Chief Financial Officer Geeta Gupta-Fisker highlighted the company's "robust working capital model" and said Fisker is in discussions with banks exploring "non-dilutive asset-based borrowing facilities" to fund further development work.
Now what
Fisker is not selling from a position of strength, with the stock down nearly 40% so far in 2022 and down more than 20% since mid-April. In the long run, any dilution from the added shares will be a small price to pay if Fisker is able to use the cash to launch a successful product, but that outcome remains far from certain.
On a day when the broader markets are down sharply, there isn't much patience being shown to a pre-revenue, high-risk company like Fisker. Given the uncertainty about the business and the lack of clarity about the capital raise, investors appear content to watch this one from the sidelines.
