Fisker Inc. (NYSE:FSR), the electric vehicle (EV) producer, announced its plans on Friday to offer an additional $170 million of convertible debt to an existing institutional investor. The offering, which comes with a 12% original issue discount, could generate about $150 million in gross proceeds for the company.
This news followed a period of notable share price movement for Fisker. The company's shares experienced a premarket drop on Friday but later saw gains during morning trading. This came in the midst of a four-day winning streak, which occurred after a six-session losing streak where the shares fell by 23.9%. According to InvestingPro data, Fisker's shares have seen a strong return over the last three months, with a 17.43% increase, but they have also experienced a year-to-date return of -11.97%.
The proposed offering is connected to an amendment of a previous securities purchase agreement. In this agreement, Fisker had announced a $340 million convertible note offering, with the potential to increase to $680 million. With this latest announcement, Fisker might now offer up to an additional $623.3 million in convertible debt, which could result in extra gross proceeds of up to $550 million.
Despite these developments, Fisker's shares have declined by 10.7% year to date. This is in contrast to the performance of the Global X Autonomous & Electric Vehicles ETF DRIV and S&P 500 index SPX, both of which have rallied this year. This downtrend comes even as Fisker delivered its first EV, the Fisker Ocean SUV, earlier this year.
As per the InvestingPro Tips, Fisker's revenue growth has been accelerating with a 1600.0 % increase as of the last twelve months (LTM2023.Q2). Yet, the company is quickly burning through cash with an operating income, adjusted to -527.91M USD. Additionally, the company's valuation implies a poor free cash flow yield.
It's important to note that while Fisker operates with a moderate level of debt, it's been increasing its total debt for consecutive years. Despite these financial challenges, the company's liquid assets exceed its short-term obligations, suggesting a degree of financial stability.
Investors should also be aware that Fisker does not pay dividends to shareholders and has not been profitable over the last twelve months. The company's shares are currently trading at a high revenue valuation multiple and a high Price / Book multiple of 4.29. Based on InvestingPro's fair value estimate, Fisker's shares are valued at 7.87 USD, slightly below the analyst target of 8 USD.
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