Mad Hedge Technology Letter
November 15, 2023
Fiat Lux
Featured Trade:
(CONSIDERING AT INVESTMENT IN FISKER THEN READ THIS)
(FSR), (TSLA)
Posts
Removing the Chief Accounting Officer and delaying earnings on the day of earnings is a massive red flag for EV start-up Fisker (FSR).
Fisker said in a filing that it “determined that it has material weaknesses in the company’s internal control over financial reporting.”
Hiring the wrong person for one of the most important jobs at the company only to realize on the day of an earnings report is more than bad optics, and it certainly means there is probably a lot worse going on under the hood.
The blood bath in FSR shares continues today with the stock cratering over 2% which is on the heels of a 21% drop on Tuesday.
Fisker CFO Geeta Gupta-Fisker said the company is cutting its 2023 production guidance to a range of 13,000-17,000 units to enable the company’s “global delivery and logistics platform to scale” and not sit on inventory. Fisker’s challenges with delivery resulted in 4,725 vehicles produced, but only 1,097 delivered.
FSR has continued to over-promise and deliver which creates a toxic recipe for lower stock prices.
After peaking at over $28 per share in the summer of 2021, the stock has done nothing but slide into the abyss.
CEO Henrik Fisker said customers were waiting a long time for their vehicles and were getting “annoyed.”
Fisker’s production forecast stood at 20,000-23,000 units, which itself was reduced from a prior forecast of 32,000-36,000 in May, and again from 42,400 earlier this year.
It’s only time until the EV company starts reducing its forecasts even more and this constant expectation of changing expectations is due to bad management.
FSR lost $91 million in the past quarter and only has a tick above half a billion in cash.
Doing some basic math, it means that FSR will burn through their existing cash in 5 quarters if they lose around the same amount of cash each quarter moving forward. If this happens, they will need to tap the corporate debt market and pay extortionate rates of something between 17% and 20% considering they have a high chance of filing for bankruptcy.
Readers should keep in mind that FSR doesn’t sell a cheap car.
It’s quite expensive which will make it even harder to scale.
That’s bad news for a start-up that only delivers about 1,000 cars per quarter.
Performance and management seem like they aren’t up to snuff and on paper, the company isn’t hitting the metrics it needs to be taken seriously by investors.
From a pricing point of view, Fisker made pricing adjustments for its lone Ocean SUV, cutting its top trim Ocean Extreme by $7,500 to $61,499.
Ultimately, I see FSR’s competitive position, or lack thereof exacerbating as we move forward.
I don’t see how they catch up with the heavyweights as it relates to many critical factors in running a successful EV firm.
Low-interest rates or something similar to them will not be back for a long time and perhaps never.
This new rate environment doesn’t favor the start-ups the ones that already “made it” in a low-rate environment of the past.
FSR makes a good car, but not to the point where buyers will pass up other cheaper options.
If FSR is struggling to deliver more than 1,000 cars per quarter, it bodes ill for repeat purchases after so many buyers are waiting for cars that should have already been delivered.
Management not understanding the logistics of the situation is hard to fathom in 2023.
They might want to pick up the phone and call around to see what is going on.
If a buyer spends more than $70,000 for an EV from an untested brand like FSR, better get the car there on time.
There is a reason why Tesla (TSLA) just caught a bid and shares went up 18% and the stock has doubled this year and it’s not because they have trouble delivering 1,000 cars.
I’ll take a hard pass on FSR for right now.
Mad Hedge Technology Letter
March 8, 2021
Fiat Lux
Featured Trade:
(A SPECULATIVE EV NAME TO CONSIDER)
(FSR), (TSLA), (NIO)
The 700% gain by Tesla (TSLA) in the past 365 days has meant that this is a Tesla world and everyone else is living in it.
Not to mention they produce a magnificent car that everyone wishes they could drive.
Just look at the unusual options activity of last Friday, and the top 10 most voluminous call activity was in TSLA and Chinese electric vehicle (EV) maker NIO.
Heavy call option buying signals that derivative traders believe the underlying stock will go up in the short-term.
EVs have leaped ahead of the cloud as a derivate of the cloud that contains ultra-growth price growth in the underlying stocks.
Fortunes are being made on speculative EV bets as we speak.
The success has spawned lookalikes, charlatans, and copycat imposters that hope to mimic the same type of trajectory and business.
Infinite attempts will be made to make a crack at the Tesla narrative and to join them as the number two or three in a group of one.
One speculative bet that has a distant shot of making headway in the short to medium term is EV manufacturer Fisker (FSR).
Fisker recently made ingenious inroads to Apple’s subcontracting partner, EV Taiwanese manufacturing specialist Foxconn Technology Group.
They agreed to develop a smartphone maker Foxconn’s hoping the manufacturer’s efforts will boost its automotive capabilities at a time when technology companies including its main customer, Apple Inc., are looking to expand in vehicles.
It’s not coincidental that Foxconn’s first try to sort out the teething pains coalesces around an unknown brand like Fisker.
If plans to fortify their skills in this relatively new industry go awry, they’ll just write this one off.
The know-how and knowledge developed on the ground could also reroute Fisker’s prospects and attach it to the back of Apple’s potential 5G car.
A three-way partnership with each entity providing expertise would certainly mean a 10-fold increase in Fisker’s underlying stock or provide the ammo needed to claim itself as number 2 to Tesla.
Of course, the road is windy and long and there is no certainty that Fisker will knock the socks out of this agreement, but the parameters have been initially set for them to do well in the short-term.
The car will be built by Foxconn, targeted at multiple markets including North America, Europe, China, and India, and sold under the Fisker brand.
Production is set to start in the fourth quarter of 2023.
There is outsized risk in producing this car because Foxconn specializes in making smartphones and not cars.
They are new to the auto business and relying on collaboration and innovative manufacturing that will either go well or unravel quickly.
Fisker founder Henrik Fisker has criticized the car industry for being outdated and said, “We still talk about adopting the Toyota manufacturing system,” referring to a production and logistics concept that was developed decades ago.
Fisker plans to design and market the vehicle while Foxconn will supply the skateboard chassis and manage supply chain and assembly.
Provided they can use their smartphone know-how and flip it into car-making mode, however, in reality, it’s a tall order for the Taiwanese giant.
“Outside the box” solutions are needed to compete with Tesla and taking a speculative bet on Fisker also means believing this Foxconn partnership will work.
Shares of Fisker rose 39% on the announcement showing there is a cohort believing the risk is worth a bet because the upside is savory.
Foxconn will build more than 250,000 vehicles annually for the Fisker partnership and Founder Fisker hatched the plan when he was reading about Apple’s plans for a car. He said he began sketching what he thought a tech company would build if one went into the car business.
“It will be like nothing you’ve seen before,” Fisker said.
With still much development yet to come, Apple will take 5-7 years to launch their car and that’s if they can get their act together while caring for their main iPhone business.
Certainly, many things need to align for Fisker to score a long-term contract designing Apple smart cars, but at least they can claim to be in the same universe as Apple, even if it is a distant planet.
