Fisker (NYSE: FSR) stock price tumbled by more than 30% on Monday as bankruptcy risks continued. It crashed to an all-time low of $0.09 after the company ended talks with a large automaker.
Bankruptcy risks remainFisker has been in the spotlight in the past few months as investors continued worrying about its bankruptcy risks.
The company bought itself sometime this month after raising $100 million from investors. However, in a statement, the company said that it may not meet the closing conditions for these funds.
It also raised the optimism among investors that it would receive a large investment from a large automaker.
Fisker did not name the company but rumours have been going on about Nissan, the giant Japanese company. In a statement on Monday, Fisker said that talks had not worked out. It also mentioned several alternatives saying:
“Such alternatives may include in or out of court restructurings, capital markets transactions (subject to market conditions), repurchases, redemptions, exchanges or other refinancings of its existing debt and the potential issuance of equity securities.”
As we wrote before, Fisker had hired restructuring experts as it looks for alternatives. In my view, the best approach will be to file for bankruptcy. For one, the company’s total equity stands at around $48 million, meaning that it won’t be able to raise substantial sums of money by selling shares.
I also believe that raising debt, including convertibles, will not be easy for Fisker because of its business weakness. Remember, the company has suspended vehicle manufacturing for six weeks and the EV industry is struggling.
Worse, I expect that the company will be sued by investors who have lost money as the stock tumbled. These investors will argue that the company knew that its financial conditions were deteriorating when it issued the encouraging statement about its financing.
Fisker’s collapse has been a victory for short-sellers since it was one of the most shorted companies in the US. At some point, it had a short interest of more than 55%.
What next for Fisker stock price?
So, what next for Fisker shares? As I have written before, the outlook for Fisker is extremely dire as bankruptcy risks remain.
However, as we have seen in the past, companies that file for bankruptcy tend to become popular among meme stock investors, which pushes them higher, albeit for a short time. Therefore, in the long run, I suspect that Fisker share price will crash to zero.
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