Trouble electric car startup Fisker filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court, District of Delaware late last night. This is merely the first in a long series of actions the company will need to take to eventually exit bankruptcy, likely under new ownership, but there’s still something to learn from this initial filing.
Welcome to a Delaware-themed installment of The Morning Dump, focused today a little more on the C-Suite than the C-pillar. Up first, a look at the unsecured creditors that Fisker owes money to, including Adobe. I’ll then chat a bit about the secured creditors and who, in the end, could end up owning the company.
Akio Toyoda survived an attempt on his Toyota Chairmanship, though even the discussion was a fairly unusual occurrence for a Toyota shareholder meeting and a sign that Japan’s corporate environment is beginning to change. Elon Musk also survived his own shareholder meeting, this time many billions of dollars richer, and it sounds like Musk is ready to spread some wealth around to employees.
Here Are Fisker’s 20 Biggest Unsecured Creditors
In what was seen as a rapidly expanding electric car market, Fisker’s version of contract manufacturing seemed like it had the possibility of success. Electric carmakers like Tesla, Rivian, and Lucid were all enjoying big share prices when Fisker went public via a SPAC.
A sudden price war, the Inflation Reduction Act, software issues, parts shortages, cripplingly bad reviews, and alleged mismanagement all conspired to doom Fisker to inevitable bankruptcy as the money it was earning from selling discounted Fisker Oceans was clearly not going to be enough to cover the company’s mounting debts and interest payments.
When a company files for bankruptcy it has to tell a bankruptcy court who, exactly, is owed money. As this is a Chapter 11 bankruptcy, Fisker had to list its biggest unsecured creditors. These are people who don’t own any of the company or have any claim to any equity. A redacted version of the initial bankruptcy petition can be seen here via Reddit, and in it the 20 biggest unsecured creditors are listed.
You might be surprised to find out that the biggest creditor is Adobe, the company behind products like Photoshop and Premiere. Did Fisker just have a bunch of Photoshop licenses? Unlikely. Instead, Fisker lists “IT/Software” as the category for the $2,045,952.21 unsecured claim, which could include any number of back-end IT services including CRM and marketing. In this same category is Salesforce, which is owed $527,652.43.
As part of my job, I have to keep on top of who is spending what in the marketing space, and last year I couldn’t help but notice that Fisker was listed as having spent millions of dollars on digital advertising. You may have seen their ads on any number of car or lifestyle websites. Some of this was probably purchased via Google, which is why Google is owed $1,237,811.31. The same goes for NBC Universal, which is owed $649,999.97 for ads (I guess $650,000 was too much?).
The rest of the unsecured creditors are the typical companies you’d expect for a car company, including suppliers like I.G. Bauerhin (electronics) and Vector North America (vehicle electronics). Also on the list are FedEx for shipping and Manpower for what’s listed as “professional services,” which I assume is staffing-related.
Chapter 11 means the company will continue to operate and Fisker itself said it will continue with reduced operations, including “paying employee wages and benefits, preserving certain customer programs, and compensating needed vendors on a go-forward basis.”
So that’s the unsecured creditors. What about the secured ones?
Who Should Buy Fisker?
Fisker said last night that it was “in advanced discussions with financial stakeholders regarding debtor-in-possession financing and the sale of its assets.”
That first part is easy to explain. Because it’s in Chapter 11 and Fisker wants to keep at least minimally operating as a company it needs money to operate and may seek financing in order to get that money. And what of the “sale of its assets”? Who will end up with Fisker?
Previously, it was reported that Fisker had been asked to initiate massive layoffs on behalf of an investor that, from reports, appears to be Heights Capital Management, itself a subsidiary of massive trading firm Susquehanna International Group, or SIG. Does SIG want to operate a car company? Like most major financial firms, my guess is probably not.
Who else, then? The company that was responsible for building the cars was Magna and they, too, seem to be one of the larger secured creditors. As we previously reported, the company had this to say in its quarterly investor call last month:
We fully impaired our operating assets and warrants in the first quarter totaling $294 million. We have $195 million in deferred revenue associated with the Fisker contract that could offset the $294 million in asset impairments that cannot be recorded in Q1. This amount will be recognized in income as performance obligations are satisfied or upon termination of the fiscal contract manufacturing agreement.
Fisker says that it owes about $100-$500 million to somewhere between 200-999 secured creditors. Fisker also said it has between $500,000 million and $1 billion in assets. Just doing the math, it sounds like Magna at least thinks it’s owed a big chunk of what’s there for building cars, though it’s not yet clear what assets Fisker has to repay the company.
While Magna is more of a white-label constructor for car companies, perhaps Magna wants to have a public-facing brand. This could be an easy way to create a new car company for Magna and help it move beyond contract manufacturing. I’m not sure it would be worth it, but that’s one option.
Another option is Renault Nissan, which was reportedly in advanced talks to buy the Fisker Alaska truck platform in exchange for giving Fisker some much-needed cash. Now that Fisker is in bankruptcy it’s possible that Nissan could swipe the company at a discount and just rebrand everything as Nissan.
And, finally, a random investor could decide it’s a good time to be in the EV business and buy the company.
Akio Toyoda Survives, But Toyota Execs Grilled By Shareholders
I’ve used this space to talk briefly about cross-held shares and how the unwinding of the practice (basically, companies owning shares in other companies they do business with) is indicative of a change in Japanese corporate norms. Specifically, the chummy relationship between execs made it harder for even large outside investors to sway the goings on of a company. This is changing and Toyota, after setting record profits, had to face some difficult questions at its annual shareholders meeting.
While Akio Toyoda, former CEO and current board chair, was easily re-elected in spite of a campaign to unseat him, the company’s board was hit with some static.
Hans Greimel went and had this to report:
Shareholders at the June 18 gathering here hit out at Toyota for its ongoing safety testing and certification scandal, grilled the board about its oversight and even accused Chairman Akio Toyoda of spending too much time on motorsports as his personal “hobby.”
“Is the internal control and government not functioning?” the one shareholder asked.
He said he was “astounded by the news” earlier this month that Toyota had been tripped up in the same kind of misconduct that embroiled other Toyota Group companies.
C’mon, you can’t hate on the motorsports stuff! Most car execs probably waste their time playing golf or tennis or something boring like that. Motorsports is sports… with motors.
Musk Says He’ll Give Spot Options To High-Performing Folks
People have a lot of feelings about Elon Musk and, you know, trust-but-verify, but shortly after being handed a massive paycheck from investors he’s reportedly turning around and offering stock grants to employees who do stellar work.
“Over the next few weeks, Tesla will be doing a comprehensive review to provide stock option grants for exceptional performance,” Musk said in an email, according to the two people who reviewed it and are based in China and the U.S., respectively. They declined to be named as the memo is for internal use.
“There will also be an ongoing program to award spot option grants for anyone who does something outstanding for the company. Thanks for everything you’re doing to make Tesla successful,” the email said.
Neat.
What I’m Listening To While Writing TMD
I was going to call Car Seat Headrest a post-punk band because post-punk is just the term I use for any band that’s harder than Enya but softer than Rancid. In reality, Car Seat Headrest is over-the-plate Indie Rock, whatever Indie Rock is. Labels are meaningless! It’s a great song.
The Big Question
Who should buy Fisker?
Same exact Fisker playbook as last time, though I suppose he finally got to an IPO this go around ($$ being the only thing he’s ever really after). Hamstring your engineers -> put out flawed vehicles to keep the headlines coming -> oops not *those* headlines! -> go bankrupt -> employees’ lives upended -> Henrik walks away with pockets full of cash.
A simple rule for all investors, engineers, suppliers, etc – if the building says Fisker on it, turn around and walk away.
I am more tempted than I should be by the Fisker Ocean.
I know it’s a shyte show, but I feel like a lot of the parts are there and they just need to be sorted.
Unfortunately most of the sorting needs to be done in the software, where I am significantly less than expert. It can’t just be fixed with an LS swap, like Fisker’s last disaster.
I am more tempted than I should be by the Fisker Ocean.
I know it’s a shyte show, but I feel like a lot of the parts are there and they just need to be sorted.
Unfortunately most of the sorting needs to be done in the software, where I am significantly less than expert. It can’t just be fixed with an LS swap, like Fisker’s last disaster.
Can’t they just Photoshop the debt away?
Can’t they just Photoshop the debt away?
That image really makes you appreciate how much Graz Magna paved over.
That image really makes you appreciate how much Graz Magna paved over.
Honda/Sony/Afeela should buy Fisker
Saab should buy Fisker
Honda/Sony/Afeela should buy Fisker
Saab should buy Fisker
“Who should buy Fisker?”
Apple.
Their car program was recently aborted as it seems they couldn’t agree on a physical design.
So Fisker has what Apple needs… a good looking starting point for them to restart their auto program.
And Apple has what Fisker needs… money and help with software.
“Who should buy Fisker?”
Apple.
Their car program was recently aborted as it seems they couldn’t agree on a physical design.
So Fisker has what Apple needs… a good looking starting point for them to restart their auto program.
And Apple has what Fisker needs… money and help with software.
Was Tesla not giving employees stock before? It’s not that uncommon at tech companies, and since Tesla is both operated and valued as a tech company I’d be surprised if they weren’t. If nothing else it’s a good employee retention mechanism since they tend to vest over the course of multiple years and you lose them if you leave. I know one guy who delayed his retirement by a year because his company gave him stock right before he was originally planning to.
Basically I’m saying this is a non-story unless someone can confirm to me that Tesla was not using stock-based compensation before this.
Yearly “refresher” grants are pretty common, or grants on promotion, though usually for public companies it’s lower-risk RSUs instead of options. This sounds like it might be outside of the usual cycle, but “spot options” also implies there’s specific conditionals on whether they’ll actually receive the options as well. Between that and what’s likely to be a relatively high strike price since the stock’s overinflated, the odds of those employees ending up ahead are a bit shaky for something that’s supposed to be a performance award.
Was Tesla not giving employees stock before? It’s not that uncommon at tech companies, and since Tesla is both operated and valued as a tech company I’d be surprised if they weren’t. If nothing else it’s a good employee retention mechanism since they tend to vest over the course of multiple years and you lose them if you leave. I know one guy who delayed his retirement by a year because his company gave him stock right before he was originally planning to.
Basically I’m saying this is a non-story unless someone can confirm to me that Tesla was not using stock-based compensation before this.
“Trouble electric car startup Fisker filed for Chapter 11 bankruptcy…”
You mean “Troubled electric car company.”
Oh, wait. You had it right.
“Trouble electric car startup Fisker filed for Chapter 11 bankruptcy…”
You mean “Troubled electric car company.”
Oh, wait. You had it right.
Why would anyone buy Fisker? The name is mud with ongoing liabilities due to bad design and engineering, there’s no innovative tech to acquire, there’s not even an interesting vehicle—another damn SUV. WGAF? Yeah, they sell, but from name brands with history and good chances of survival. It’s a premium brand, but in the lower end and those buyers still need to worry about where they put their money (and there are plenty of better known and regarded brands to buy). People might buy a basic sports car that offers something unique from a small player as it would be a toy and a—theoretically—simple one, so it won’t leave the buyer without a vehicle while it’s down and any problems can likely be solved if the OEM dies. For competition, there’s already the Rivian R1S as well as the established players and the market is cooling a bit. When Range Rover builds an EV, where’s Fisker’s business case? The Magna buying question is interesting, running the currently idle line full of tooling to try to recoup their money from Fisker, but then they’re stuck with warranty liabilities going forward with their name now attached and what about when the vehicle runs its course? They either have to come out with a replacement and probably additional models to fill out the brand or they let it die and forget about it, but after all the money they’d need to invest in putting their name out there as an automobile brand? Yeah, it’s not unprecedented (Bertone and Pininfarina both took over rebadging models dropped by their manufacturer, though FIAT didn’t go bankrupt), but it’s rare and it’s a different time and scenario.
Why would anyone buy Fisker? The name is mud with ongoing liabilities due to bad design and engineering, there’s no innovative tech to acquire, there’s not even an interesting vehicle—another damn SUV. WGAF? Yeah, they sell, but from name brands with history and good chances of survival. It’s a premium brand, but in the lower end and those buyers still need to worry about where they put their money (and there are plenty of better known and regarded brands to buy). People might buy a basic sports car that offers something unique from a small player as it would be a toy and a—theoretically—simple one, so it won’t leave the buyer without a vehicle while it’s down and any problems can likely be solved if the OEM dies. For competition, there’s already the Rivian R1S as well as the established players and the market is cooling a bit. When Range Rover builds an EV, where’s Fisker’s business case? The Magna buying question is interesting, running the currently idle line full of tooling to try to recoup their money from Fisker, but then they’re stuck with warranty liabilities going forward with their name now attached and what about when the vehicle runs its course? They either have to come out with a replacement and probably additional models to fill out the brand or they let it die and forget about it, but after all the money they’d need to invest in putting their name out there as an automobile brand? Yeah, it’s not unprecedented (Bertone and Pininfarina both took over rebadging models dropped by their manufacturer, though FIAT didn’t go bankrupt), but it’s rare and it’s a different time and scenario.
Delorean should buy Fisker.
And then Stellantis should buy Delorean… so the company can become an even bigger mess of brands.
Delorean should buy Fisker.
And then Stellantis should buy Delorean… so the company can become an even bigger mess of brands.
So how long after Fisker completely shuts down, do you see Henrik show up as a consultant to Stellantis?
He is legitimately a talented designer, if they made him a consultant just in that, it wouldn’t necessarily be a bad thing. Of course, drawing pretty pictures is pointless without actually building them, and Stellantis sort of struggles to get new models to market
So how long after Fisker completely shuts down, do you see Henrik show up as a consultant to Stellantis?
He is legitimately a talented designer, if they made him a consultant just in that, it wouldn’t necessarily be a bad thing. Of course, drawing pretty pictures is pointless without actually building them, and Stellantis sort of struggles to get new models to market
No one should buy Fisker and I have absolutely no idea why people still give Henrik Fisker money. He’s very openly a grifter. But then again we elected a conman president in 2016 and are looking poised to do it again, so I don’t think it’s much of a stretch to say that as a society we love grifters, at least here in Murica.
We are a culture that places higher value in the image, the way the game is played, over the substance and heart of any issue.
I think it’s just more hubris in this case. Fisker is a designer, and a pretty good one. I don’t know why anyone thought he was ever qualified to run a car company but my guess is he has a very good image when presenting the idea of a car company to people that desire so very very much to replicate what Tesla has done (from a stock market cap POV).
“ We are a culture that places higher value in the image, the way the game is played, over the substance and heart of any issue”
…very well said, amigo. I couldn’t agree more.
No one should buy Fisker and I have absolutely no idea why people still give Henrik Fisker money. He’s very openly a grifter. But then again we elected a conman president in 2016 and are looking poised to do it again, so I don’t think it’s much of a stretch to say that as a society we love grifters, at least here in Murica.
We are a culture that places higher value in the image, the way the game is played, over the substance and heart of any issue.
I think it’s just more hubris in this case. Fisker is a designer, and a pretty good one. I don’t know why anyone thought he was ever qualified to run a car company but my guess is he has a very good image when presenting the idea of a car company to people that desire so very very much to replicate what Tesla has done (from a stock market cap POV).
“ We are a culture that places higher value in the image, the way the game is played, over the substance and heart of any issue”
…very well said, amigo. I couldn’t agree more.
“Fisker by Nilfisk”? Isn’t the perfect buyer of Fisker Nilfisk? The Danish manufacturer of vacuum cleaners, founded by Fisker & Nielsen in 1906 (they also produced the straight-four Nimbus motorcycles until 1960).
“Fisker by Nilfisk”? Isn’t the perfect buyer of Fisker Nilfisk? The Danish manufacturer of vacuum cleaners, founded by Fisker & Nielsen in 1906 (they also produced the straight-four Nimbus motorcycles until 1960).