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Things are tough in the electric vehicle (EV) industry these days, especially for startups with reduced capital, weak demand and low production capacity.Not only fisker‘s (NYSE:FSR) Losses are piling up and negative developments are increasing. These recently culminated in a notice from the New York Stock Exchange (NYSE) that the company may be delisted.
Here’s a quick look at what’s wrong with this young EV maker and what it would mean for shareholders if it were delisted.
bad things overlap
To say Fisker faces challenges would be a gross understatement. The company recently reported a fourth-quarter net loss of $463 million, but cash and cash equivalents on its books fell to just $396 million.
Due to issues with suppliers and other delays, production in 2023 was limited to just over 10,000 units. To make matters worse, the company’s delivery infrastructure was so inefficient that it couldn’t even get half of its vehicles to consumers. Management is building a network of dealer partners to improve delivery efficiency, but the strategy has yet to gain traction.
Finally, and to add to your headache, the National Highway Traffic Safety Administration (NHTSA) has begun a preliminary evaluation of claims of unintended vehicle movement in 2023 Fisker Ocean vehicles.
All of these issues have culminated in management admitting that it “plans to conclude that there are significant doubts.” [Fisker’s] Our “ability to continue as a going concern” will be assured upon our filing with the SEC of our annual financial statements for the year ended December 31, 2023. ”
Possibility of delisting
Fisker received a notice of violation from the New York Stock Exchange in February after its stock price ended below $1 per share for 30 consecutive business days. To be clear, Fisker management intends to keep its shares listed on the exchange and is currently exploring strategies and options to re-comply with that requirement.
One option could be a reverse stock split. This is when a company replaces all the shares currently held by investors with a small number of new shares with a proportionately higher price so that the shareholder’s shares retain their previous value. This reduces the total number of outstanding shares, but does not change the company’s market capitalization. For example, in the case of Fisker, a 4-for-1 reverse split would reduce the number of outstanding shares by three-quarters and quadruple the price of the new shares from $0.34 to $1.36. If that happens, the stock price will exceed the delisting threshold of $1.
Even if Fisker does not return to compliance, rest assured that Fisker stock will not simply disappear, but will simply transition to trading in the over-the-counter (OTC) market.
That said, delisted stocks typically tend to decline significantly in value for a variety of reasons. Over-the-counter trading means lower trading volumes, as institutional investors tend to avoid stocks that are not listed on major exchanges. Additionally, demand for a company’s shares will typically decrease, as delisting is typically seen as a sign of financial distress and a precursor to possible bankruptcy.
what it means
If you’re an investor in Fisker, you’ll still own shares in the company even if it’s delisted, but it will probably be harder to sell. Given the high likelihood that the value of the shares will fall after delisting, and the other issues mentioned above, most investors would be wise to sell their shares before they are delisted.
That said, investors need to be confident that Fisker’s management will find a way to bring the stock into compliance with New York Stock Exchange rules. That would be a better option for the company. Delisting would be another headache Fisker doesn’t want to deal with right now.
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Daniel Miller has no position in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
What happens if Fisker gets delisted? Originally published by The Motley Fool
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