An unexpected car company is now at high risk of bankruptcy after acknowledging ‘liquidity concerns’ and advising of a new plan to save money.
“Fisker Ocean production was 4,789 units in Q4 2023, and vehicles delivered to customers totaled 3,818,” the company said in its fourth-quarter report.
“For full-year 2023, 10,193 Fisker Oceans were produced and 4,929 vehicles were delivered.”
“Fisker is in negotiations with a large automaker for a potential transaction which could include an investment in Fisker, joint development of one or more electric vehicle platforms, and North America manufacturing,” the company said.
“The closing of any transaction would be subject to satisfaction of important conditions, including completion of due diligence and negotiation and execution of appropriate definitive agreements.”
Fisker said that it does not have enough cash to survive the full year.
The company closed the year with $395 million in cash and cash equivalents.
That’s not enough to survive 2024, according to the company.
“The company will need to seek additional equity or debt financing, and there can be no assurance that Fisker will be successful in these efforts,” Fisker said.
As a result, “the company expects to conclude there is substantial doubt about its ability to continue as a going concern when its annual financial statements for the year ended Dec. 31, 2023, are filed with the SEC.”
The EV maker recently filed an 8-K with the Securities and Exchange Commission detailing that it has missed a key loan payment.
“The filing states that Fisker failed to pay back a loan totaling close to $3.5 million last month, lowering a potential curtain on the second iteration of the company that is staring down the barrel of potential bankruptcy,” Electrek reported.
Fisker’s financial honesty (which is required by law) could be compounding its problems as “tens of thousands” of people have canceled their Ocean reservations, according to the EV news website.
That makes sense because people don’t want to invest in a high-end, high-priced vehicle if the company that makes it won’t be around to service it.
“With millions owed in loans and the looming threat of late fees and applicable interest, Fisker may need to scrap together what is left to make good on its loan, although the repayment (of whatever amount) may result in bankruptcy,” Electrek added.
The company has not disclosed new details about the potential transaction with a large automaker.
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Also Read: Another Mall Clothing Retailer Now At High Risk of Bankruptcy
Other Economy News Today
An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.
Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.
Supply Source brands include The Safety Zone and Impact Products.
The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.
Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.
Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products
The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.
However, the company’s financial performance deteriorated in subsequent years.
Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.
The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.
In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.
Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.
The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.
The excess inventory forced the debtor to secure additional storage space, which increased storage costs.
These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.
The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.
The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.
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Also Read: This Massive Mall Retailer Is Now Closing In California
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