The saga of Fisker Inc., the ambitious electric vehicle (EV) startup, has taken another turn as a bankruptcy plan has been approved. This development, sanctioned by U.S. Bankruptcy Court Judge Thomas Horan, marks a significant step in the winding down of operations for the Southern California-based automaker. While the plan essentially wipes out shareholder investments, it offers a degree of reassurance for existing Fisker car owners, ensuring their vehicles remain operational for the foreseeable future.
This bankruptcy approval arrives amidst a backdrop of scrutiny, with Fisker currently under investigation by the Securities and Exchange Commission (SEC). The SEC’s probe focuses on potential securities violations that may have occurred at the company leading up to its bankruptcy filing in June. Fisker had previously acknowledged receiving a subpoena from the SEC, and the agency has since confirmed its investigation, emphasizing the need to preserve company records throughout the bankruptcy proceedings.
Jennifer Lee, a former SEC enforcement division assistant director, notes the agency’s assertive approach in pursuing claims even when a company under investigation has filed for bankruptcy. This regulatory pressure adds another layer of complexity to Fisker’s already troubled waters.
Navigating the Road Ahead for Fisker Car Owners
For owners of Fisker cars, particularly the Ocean SUV, the approved bankruptcy plan brings a mix of relief and uncertainty. The Fisker Owners Association played a crucial role in advocating for owners’ interests, and the plan reflects some of their key concerns. Notably, progress has been made in addressing outstanding recalls for the Ocean SUV, including issues with malfunctioning brakes and defective water pumps. The bankruptcy estate is set to cover these recall costs, alleviating a major worry for owners regarding the safety and reliability of their Fisker cars.
Another critical aspect addressed in the plan is the continued access to over-the-air (OTA) software updates. These updates are essential for the proper functioning of the Ocean, and the plan ensures this service will continue. American Lease, a company specializing in leasing vehicles to ride-sharing services, has stepped in by acquiring Fisker’s unsold inventory and crucially, securing access to Fisker’s cloud server for five years. This access will be shared with Fisker car owners, ensuring their vehicles remain up-to-date with necessary software. While the pricing for this access is still to be determined, the agreement itself is a significant win for owners, guaranteeing the long-term usability of their Fisker cars.
Brandon Jones, president of the Fisker Owners Association, expressed satisfaction with the plan’s outcome, highlighting optimism for the future service and maintenance of Fisker cars. While acknowledging ongoing discussions and negotiations, the secured access to software updates and recall resolutions provides a tangible benefit to the Fisker car owner community.
The Financial Fallout and Fisker’s Demise
Fisker’s journey from a promising EV startup to bankruptcy is a cautionary tale. Founded in 2016 and going public in 2020 through a special purpose acquisition company, the company raised substantial capital but ultimately succumbed to financial pressures. Despite Henrik Fisker’s vision to position the Ocean as a Tesla Model Y competitor, the company struggled with production and delivery challenges. Software glitches further hampered the Ocean’s market reception, despite positive reviews for its ride quality and build.
The financial strain led to significant price cuts for the Ocean, ultimately culminating in American Lease acquiring Fisker’s remaining inventory at a drastically reduced price of approximately $13,900 per vehicle. This starkly contrasts with the original retail price of the base model at $38,999 and higher trim versions exceeding $60,000, underscoring the rapid devaluation of Fisker cars amidst the company’s turmoil.
The bankruptcy filing revealed liabilities reaching up to $500 million and assets estimated between $500 million and $1 billion. Liquidation under Chapter 11 allows current management to oversee day-to-day operations during the wind-down, focusing on addressing recalls and resolving outstanding issues.
Shareholder Losses and Unsecured Creditor Claims
The bankruptcy plan unequivocally favors secured creditors, leaving shareholders with virtually no return on their investment. Fisker stock, which once peaked at $28.50 in March 2021, plummeted to a mere nickel by the time of bankruptcy, effectively wiping out shareholder value.
Beyond shareholders, numerous unsecured creditors, including Fisker car owners who filed claims, face considerable uncertainty regarding compensation. Evan Scott, an Ocean owner who filed claims totaling nearly $29,000 due to vehicle devaluation and faulty tires, represents the frustration felt by many owners who feel misled by the company’s optimistic pronouncements leading up to the bankruptcy.
By the time of the bankruptcy plan approval, over 4,000 claims had been filed against Fisker, including substantial claims from U.S. Bank and Magna International. CVI Investments, the secured creditor, holds a claim exceeding $180 million, positioning them to receive the majority of proceeds from asset liquidation. This includes Fisker’s Austrian assets and intellectual property, potentially offering an opportunity for another automaker to acquire and potentially revive Fisker’s vehicle designs and software.
For Fisker car owners seeking recourse for warranty losses and vehicle issues, legal avenues are being explored. The law firm Hagens Berman is pursuing arbitration cases against J.P. Morgan Chase Bank, a major Fisker auto loan provider, representing a further layer of complexity in the aftermath of Fisker’s bankruptcy.
In conclusion, the approved bankruptcy plan for Fisker offers a degree of stability for existing Fisker car owners by ensuring continued operation and addressing critical service needs. However, the financial collapse serves as a stark reminder of the challenges in the competitive EV market, leaving shareholders and many unsecured creditors bearing the brunt of Fisker’s downfall. The future of the Fisker car brand itself remains uncertain, dependent on the potential acquisition of its assets and intellectual property.
