The saga of Fisker Inc., the ambitious Southern California electric vehicle (EV) manufacturer, has taken another turn as its bankruptcy plan received court approval on Friday. This development marks a significant moment for Fisker car owners and stakeholders alike, outlining the path forward for the company and its vehicles amidst financial turmoil. While shareholders face complete losses, the plan offers a degree of reassurance for those who own Fisker cars, promising continued operability for years to come.
The U.S. Bankruptcy Court Judge Thomas Horan in Delaware officially approved the wind-down plan, a decision made while Fisker is under scrutiny from the Securities and Exchange Commission (SEC). The SEC is currently investigating potential securities violations that may have occurred at the company leading up to its Chapter 11 bankruptcy filing in June. This investigation, confirmed by the SEC’s subpoena in August, demands the preservation of company records, indicating a serious probe into Fisker’s past dealings.
Jennifer Lee, a former assistant director at the SEC Division of Enforcement, noted the agency’s intensified approach in pursuing claims even when a company under investigation has filed for bankruptcy. This underscores the gravity of the SEC’s involvement and the potential repercussions for Fisker’s former leadership.
Adding to Fisker’s woes, co-founders Henrik Fisker, the chairman and CEO, and his wife Geeta Gupta-Fisker, the CFO and COO, along with other executives, are entangled in multiple shareholder lawsuits. These legal actions allege breaches of fiduciary duties and violations of securities laws. Plaintiffs point to instances where Henrik Fisker publicly promoted the company’s bright future even as its financial health deteriorated.
Despite these challenges, the approved bankruptcy plan emerged after intense negotiations and legal proceedings. Crucially, the Fisker Owners Association voiced their support for the plan, acknowledging Fisker’s efforts in addressing existing recalls for the Ocean SUV and engaging in discussions regarding maintenance concerns. This owner advocacy played a significant role in shaping the final agreement.
A key aspect of the approved plan addresses concerns raised by the National Highway Transportation Safety Board (NHTSA) regarding funding for recalls. The plan ensures that Fisker’s estate will cover the costs associated with recalls, including those for brake malfunctions and defective water pumps, providing relief and safety assurance to Fisker car owners.
Furthermore, the plan tackles the critical issue of access to Fisker’s cloud server, essential for over-the-air software updates needed for the Ocean’s operation. American Lease, a vehicle leasing company, stepped in with a $46.25 million bid for Fisker’s unsold inventory of over 3,000 cars and crucially agreed to allocate $2.5 million for five-year access to the cloud services. This access will be shared with the existing Fisker car owners, securing the vital software updates for their vehicles, although the pricing for owners is yet to be determined.
Brandon Jones, president of the Fisker Owners Association, expressed satisfaction with the outcome, highlighting optimism for the future service and maintenance of Fisker cars. While negotiations are still ongoing, the plan lays a foundation for owners to receive the necessary support for their vehicles.
Fisker’s journey began in 2016, going public in 2020. Despite raising substantial capital, the company faced financial headwinds, ultimately leading to its bankruptcy. Henrik Fisker’s vision for the Ocean SUV as a Tesla competitor was hampered by production and delivery issues, compounded by software problems, even though the vehicle garnered praise for its ride and build quality.
Thousands of Fisker car owners, who became unsecured creditors by filing claims against the company, were eligible to vote on the bankruptcy plan. Evan Scott, a Fisker Ocean owner, voiced his disappointment, feeling misled by the company’s optimistic pronouncements before the bankruptcy. He, like many shareholders, has seen his investment become worthless as Fisker’s stock plummeted from a high of $28.50 in 2021 to pennies on the dollar by the time of bankruptcy.
The Fisker Ocean, initially priced starting at $38,999, saw significant price reductions before American Lease acquired the inventory at approximately $13,900 per vehicle. Fisker’s bankruptcy filing followed its inability to secure a strategic investment, reportedly from Nissan, and failed attempts to sell the company. The company’s liabilities were estimated to be up to $500 million, with assets ranging between $500 million and $1 billion at the time of filing.
Fisker is undergoing liquidation under Chapter 11 bankruptcy, a process that, while typically for restructuring, in this case, facilitates an orderly wind-down. Current management remains in control during this process, focusing on addressing recalls and other pressing issues.
With over 4,000 claims filed against Fisker, including substantial claims from U.S. Bank and Magna International, the financial complexities are significant. Fisker still holds assets in Austria and intellectual property, which could be sold, with proceeds primarily benefiting secured creditors like CVI Investments, affiliated with Susquehanna International Group.
The future for Fisker cars remains uncertain in terms of new production, but the approved bankruptcy plan provides a framework for existing owners to maintain and operate their vehicles. Law firms are exploring avenues for car owners to seek compensation for losses related to warranties and vehicle issues, indicating ongoing efforts to support those impacted by Fisker’s downfall. While the Fisker story is far from over, this bankruptcy plan marks a crucial chapter, especially for the owners of Fisker cars navigating the road ahead.
