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Is Fisker The Most Tragic VC-Backed Debacle In Recent History?


Henrik Fisker

Henrik Fisker

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In January 2005, legendary car designer Henrik Fisker founded a company to bring innovative new thinking to the automobile industry.

Between that date and today, Fisker  Automotive would create perhaps the most beautiful car ever made, raise almost $1.4 billion dollars from investors as diverse as Leonardo di Caprio and Kleiner Perkins, obtain a $528 million loan from the U.S. Department of Energy, balloon to 600+ employees, default on loans or investment conditions at least four separate times, spend $535,000 on a website, get sued by its own employees, get evicted from its primary business location, and be investigated by the government — apparently for its incredible ability to burn a billion dollars while delivering only a few thousand actual completed cars.

What a wild, crazy ride it’s been.

“Fisker spent a stunning $900,000 for each vehicle it produced,” PrivCo chief executive Sam Hamadeh told me. “Then they sold them to dealers for an invoice price of just $70,000.”

PrivCo, the intelligence source on non-public companies, has compiled an exhaustive dossier on Fisker, its cash, its commitments, and its massive failure to produce anything like a functional, profitable business.

While burning through $1.4 billion dollars, it produced fewer than 2,200 cars, PrivCo data shows, 600 of which remain unsold on dealers’ lots.

And 1,200 investors, which include university endowment funds and company pension plans, are learning that their cash has been completely wiped out.

Even worse?

The government was grossly negligent in both its issuing of the Fisker loan — the biggest public loss since the infamous Solyndra Solar debacle, which  cost the government as much as half billion dollars.

Not only did the U.S. Department of Energy apply “negligent underwriting standards” in granting the Fisker loans, it also failed to enforce the loan conditions as Fisker breached the loan terms, PrivCo says. That failure cost the U.S. taxpayer an extra $192.3 million.

That’s bad enough. But sadly, it gets even worse.

Even as Fisker continued private fundraising efforts, when the DOE privately issued a Drawdown Stop Notice to halt payments to the stumbling car company, it failed to warn future investors that Fisker was in default.

As PrivCo writes in its report:

U.S. Department of Energy made no announcement to the public that Fisker was in Default of Its Loan and Credit Agreements and no longer had access to the remaining balance of $336.4 Million, resulting in continued reliance on hundreds of additional individual investors purchasing Fisker stock in the hundreds of millions of dollars through the Advanced Equities “Fisker Funds” limited partnerships as well as reliance on that reasonable assumption that Fisker had continued and substantial access to the remaining $336.4 Million of credit line liquidity through the U.S. government.

Fisker Automotive timeline (excerpt), produced by PrivCo, as published on VentureBeat, April 2013

Fisker Automotive timeline (excerpt), produced by PrivCo, as published on VentureBeat, April 2013

Enlarge Photo

At the end of the long, sad story, Hamedeh says, Fisker has less than $20 million cash in hand, has stopped paying all creditors, and faces multiple lawsuits.

“Fisker Automotive may well go down as the most tragic venture capital-backed debacle in recent history,” Hamadeh said in a statement. “The sheer scale of investment capital and government loan money — over $1.3 billion in all — was squandered so rapidly and with so little to show for it that the wreckage is breathtaking.

"Bankruptcy will be the end of Fisker, but for the taxpayers, venture capital firms, individual investors, and Fisker’s suppliers, it will all be too little too late.”

Here’s the long sad tale in infographic form:

CLICK HERE TO SEE VENTUREBEAT'S ENTIRE INFOGRAPHIC

This article, written by John Koetsier, was originally published on VentureBeat GreenBeat, an editorial partner of GreenCarReports.

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Comments (10)
  1. Ouch. I had forgotten how much really money would be lost when Fisker went away.
     
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  2. I had an odd feeling about Fisker Automotive, not at first but after I took a close look at the car. This may sound strange, but being a long time car enthusiast when I looked at the Karma it's beauty which is meant to grab you seemed to be a disguise. I've owned and dealt with six figure cars but the Karma only seemed to look good, build quality wasn't right, functionality was poor, and both the driving performance and efficiency were way off other cars in its category. Unlike Tesla who's Model S seems to be spot on as far as being competitive goes. But was Fisker Automotive really mismanaged to death, or was this a plan to grab over one billion dollars, and run?
     
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  3. It's beyond me how Fisker managed to squander so much cash on an ultimately half baked vehicle based on third party technology and build in third party production facilities.

    From the numbers I can dig up I doubt Tesla spend much more than half what Fisker spend on a far superior car with lots proprietary technology build in its very own production facility.
     
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  4. Elon Musk contends that Fisker took his idea and ran with it himself, having given Tesla the "run around" for months, I tend to agree that it may have been a money spinning venture rather than a genuine stab at making a proper electric car. Tesla has in every way approached the issues correctly, first getting a viable power source (battery) then a viable motor, then a viable floorpan and ONLY THEN, spending money on a car. First a prestige Sports car, then a prestige Saloon, then a 4x4 and eventually mass market. Where was all this planning and thought at Fisker? Looks more like DeLorean to me...
     
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  5. I came to say the same thing about Fisker's relationship to Tesla. What a jerk.
     
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  6. Still hoping that a white knight comes along and rescues the company. With a little product refinement and a LOT of cash, the car could be a winner, even though it has never been on my buy list- but neither is the Tesla, for the same reasons. Oh, well. Lots of companies failed in the 20's and 30's. What's new?
     
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  7. They failed without money from the American taxpayer. That's what's new.
     
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  8. i thought Fiskar only drew down 192 Million of it's total line of credit, so the investors got burned worst, but the feds have a secured line on it's assets and IP. The taxpayers will lose but they may get up to half back.
     
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  9. Only in the Obama economy can getting 50% (not likely in reality) of your investment back be spun as being a good deal.
     
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  10. maybe recently, but,

    Worst, that would be Webvan or Pets.com
     
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