Fisker’s Failure and the EV Industry’s Boulevard of Broken Dreams

When the tide goes out, you can see who’s swimming naked. That’s not my idea, but Warren Buffett’s – and as the tide of easy money goes out, we can all see which electric vehicle (EV) start-ups never had any clothes to begin with.

After promoting clean-energy vehicles for years like they’re the greatest thing since sliced bread, now suddenly the mainstream press is signaling soft EV demand. First, Tesla started slashing its vehicle prices; then, start-ups like Lucid Motors has little choice but to follow Tesla’s lead and cut their own EV prices.

Even the seemingly almighty Tesla is susceptible to problems, as CEO Elon Musk warned that his much-touted Cybertruck won’t be profitable until 2025. Musk also cautioned that Chinese EV firms will “demolish” their rivals if trade barriers aren’t put into place.

Then there’s EV maker Rivian, which will reportedly have to face a class-action lawsuit claiming that the automaker had defrauded its IPO investors over vehicle prices. This probably goes without saying, but neither Lucid Motors nor Rivian is profitable.

Yet, even Lucid and Rivian look like massively successful business ventures when compared to another EV start-up called Fisker. According to The Wall Street Journal via “people familiar with the matter,” Fisker “has hired restructuring advisers to assist with a possible bankruptcy filing.”

Courtesy: @Sam1am1911

This isn’t what a dip-buying opportunity looks like; it’s the unwinding of a stock bubble that should never have expanded in the first place. Without the easy-money policy of prior years, the tide is now out for speculative start-ups like Fisker.

Granted, Fisker stock did rebound somewhat after crashing. That’s because Fisker reportedly “hired restructuring advisors” and, per The Wall Street Journal in a follow-up article, “issued a statement saying that it ‘often’ worked with outside advisers.”

Sure, but does Fisker “often” work with outside advisers to work out the details of a possible bankruptcy filing? Meme-stock traders might be able to stage a brief short squeeze to push Fisker stock higher in the short term, but this doesn’t change the long-term outlook for Fisker as a going concern.

Of course, this isn’t just a story about Fisker in particular. The EV start-up graveyard is littered with an array of defunct and troubled businesses. Some of these include Nikola, Hyliion, Canoo, Lordstown Motors, Arrival, Polestar, Vinfast Auto, Lotus Technology, and Faraday Future.

For investors, there’s harsh lesson here about what can happen when you buy stocks near the peak of a hype cycle. Meanwhile, there’s a bigger-picture lesson about the clean-energy movement as the world’s reliance on petroleum won’t just disappear in the next few years, even if some politicians want to phase oil out by 2030.

Courtesy: @elliottwaveintl

Tesla stock investors may be disappointed in the price action of the past couple of months. However, that drawdown is nothing compared to what long-term shareholders of many smaller EV manufacturers have endured.

Shockingly, the bursting of the EV stock bubble has cost investors $1.5 trillion. Before you go on a bottom-fishing expedition with some of these EV stocks, bear in mind that it will be awfully difficult to pick the ones that will recover, if any of them actually do recover.

As for Fisker’s shareholders, I’m not trying to pick on you. I’m sorry for your losses and hope that, going forward, you’re able to develop a better stock-picking strategy.

Most importantly, get in the habit of conducting your full due diligence on any company that you’re considering investing in. That way, you should be sufficiently informed to avoid crash-and-burn scenarios with companies like Fisker.