Shares of electric car stocks Freyr Battery (FREY +6.77%), Lucid Group (LCID +6.30%), and Fisker (FSR +0.00%) tumbled in afternoon trading Wednesday, stung by The Wall Street Journal's report out this morning detailing the financial difficulties that EV stocks are facing.
As of 3:10 p.m. ET, Freyr stock is down 7.4%, Lucid stock is off 8.5%, and Fisker is hurting worst of all -- a solid 10% decline.
NASDAQ: LCID
Key Data Points
What WSJ said about EV stocks
In today's column, the Journal highlighted the financial difficulties of a whole host of electric vehicle stocks that went public via SPAC transactions in 2020 (Fisker) and 2021 (Freyr and Lucid). A total of 43 such EV and rechargeable battery stocks went public during this period, notes the Journal, and 18 of these companies are currently "at risk of running out of cash by the end of 2024."
Fisker was one of the companies directly named as being at risk of running out of cash. Curiously, though, Lucid stock -- which is down nearly as much as Fisker today -- was highlighted as a company that is not at risk, or at least not at risk of running out of cash in 2024. Freyr was not mentioned at all, or at least not by name.
That may not be enough to save it from the negative sentiment surrounding EV stocks today, however. With reports of slowing growth of EV sales already abounding in the press, a reminder from the Journal that these companies weren't in the best of financial health to begin with was exactly what EV investors did not need to hear today. Also, the paper pointed out that many of these companies made "unchecked projections about how quickly they could grow" in their pre-IPO press statements -- hinting that shareholder lawsuits could be in the offing if these companies don't begin delivering on their promises.
What to look for from EV stocks in 2024
And they'd better start soon. Of the three EV stocks making headlines with their declines today, Lucid stock -- down 34% over the past year -- is actually in the strongest position. (Both Fisker and Freyr are down 79% over the past 52 weeks).
With $10.8 billion in market capitalization, a cash-burn rate of $3.6 billion annually, and $4.4 billion in cash, Lucid probably has enough cash left to stay in business through 2024 and the first few months of 2025 -- but only if that cash burn rate doesn't get any higher. (Lucid's cash burn rate has gone higher in every year it's been in operation). However, the company also has $2.4 billion in debt already. If the cash runs out too quickly, Lucid will need to take on more debt or sell more shares to keep itself solvent.
Fisker and Freyr are in worse shape. With barely $550 million in market cap, Fisker already carries more debt than cash on its balance sheet -- and it's burning through more than $830 million a year. At that rate, Fisker could be out of cash by August.
Freyr, with $270 million in market cap, actually has a good chunk of change left in the bank -- nearly $300 million. But Freyr is burning $340 million a year, meaning that unless something changes soon, it will need to raise cash before the end of 2024 as well. Meanwhile, if you subtract its $22 million in total debt from the cash it has today, the company is arguably in an even tougher spot.
This seems to sum up how investors are feeling about all of these stocks today.
