Fisker (FSRN -12.70%) stock is going parabolic today. Shares of the stock were up 34% as of 9:45 a.m. ET Friday and had shot up a jaw-dropping 40.5% at its highest point in trading as of this writing. The electric vehicle (EV) start-up is struggling to ramp up production and deliveries and is running short of cash. This morning though, an update from Fisker has lifted investors' hopes of a potential turnaround in the fortunes of the EV stock.
Fisker may have saved itself some trouble
In a regulatory filing, Fisker announced that it has reached an agreement with an institutional investor that could save the company some money.
Among other things, the institutional investor has waived off any remedies it could have used on Fisker for failure to file its quarterly report in a timely manner with the Securities and Exchange Commission (SEC) for the period ended Sept. 30. It has also released all liens on intellectual property granted in connection with Fisker's transactions with an automotive partner.
Most importantly, the institutional investor has waived off all financial covenants on Fisker's cash reserves, which means the EV maker can now use that cash to run its operations.
While all of this may sound technical, the bottom line is that its agreement with the institutional investor could provide Fisker with more flexibility to run operations and free up some much-needed cash.
Is it time to buy Fisker stock?
As of Sept. 30, 2023, Fisker had roughly $527 million in cash and cash equivalents. That's not too bad, but Fisker's cash balance was down from about $737 million as of Dec. 31, 2022, and it raised substantial debt last year to bolster its war chest. High and accumulating losses also mean Fisker will continue to need more cash as it scales up the production and marketing of its Ocean SUV.
To put some numbers to that, Fisker started delivering its Ocean SUVs in the U.S. in June 2023 but failed to ramp up production as planned. In the nine months that ended Sept. 30, 2023, Fisker delivered a little over 1,100 EVs and generated $72 million in revenue. It also, however, incurred a gross loss of about $33 million and a net loss of nearly $298 million.
So does today's update make Fisker stock a buy? Maybe not. Having plunged to an all-time low last week and well below the $1 mark, Fisker's stock is prone to a lot more volatility now and could move either way even on flimsy excuses. That's not to say today's update is flimsy, but there's no knowing yet how the agreement will really help Fisker. If you want to bet on the EV stock, don't do it because of its low stock price. Fisker's EVs look promising, but there's also an ongoing probe into its Ocean SUV for poor braking performance. Let the EV maker prove that it can handle such hiccups and mass-produce EVs, and that its recently launched distribution model can boost sales as planned. Until then, Fisker stock remains a speculative bet.
