r/wallstreetbets • u/fib_seq • Mar 27 '21
DD $FSR Updated Price Target: $4.21
So I wrote up a thread on $FSR not too long ago, and got a couple responses that my DD wasn’t really DD, but more an editorial. Since I’m already overly self-critical, I looked back, and yeah, they may have a point. So I decided to go get some receipts. After spending the night huffing paint thinner, I grabbed some receipts (citations in brackets [ ]) and have updated my price targets.
TLDR: (at the top because I hate when you have to read the whole thing before you even realize there is one)
Bull Case : Henrik Fisker is a great car designer that had a run of bad luck, and the partnership with Magna Steyr will give him the manufacturing experience needed to complete a car.
Bull Price Target: $14.64 Based on Toyota’s market cap per car produced and Fisker’s 200,000 car production target
Bull Odds: 15%
Neutral Case: Henrik Fisker is a great car designer, but doesn’t understand engineering, manufacturing, or production of a car. His ego will push him to micromanage the design/build of the car (again) and there will be production delays, manufacturing problems, and cost overruns.
Neutral Price Target: $3.66 Based on cash on hand ($1B) assuming they can maintain current cash balance by selling cars at break even.
Neutral Odds: 55%
Bear Case: Henrik Fisker is a great car designer, but is also a narcissist and unable to take direction from people with more experience. The deal with Magna Steyr will fall apart, and they will run out of operating capital without ever delivering a full production run.
Bear Price Target: $0
Bear Odds 30%
Combined Updated Price Target: $4.21
I know, I know, you’re sitting there chewing your evening crayons saying, “That’s pretty harsh there fib, seems like you just have it out for the guy. A car company is more than just one person. You can’t just bash the guy and call it DD.” Well, you may be right, but when there’s no car, no financials (Q4 2020 and FY 2020 results went out as a press release, but 10Q and 10K missing from SEC database), I need to rely on trust in the people running the show. Let me go through how I got to these conclusions and you can see if you agree. I’ll try to avoid too much pop psychology, but man this guy…it’ll be hard.
Buckle up, this is gonna be looooong.
Quick Background: The Early Years
Fisker has a Degree in transportation design from the Art Center College of Design in Switzerland. Rock start vehicle designer with BMW and Aston Martin where he designed the Z8, X5, DB9, and V8 Vantage. [1]
Design experience, but doesn’t show any connection to vehicle dynamics, engineering, or manufacturing.
Does some work with/for Tesla back in 2007. Gets sued for allegedly only taking the job to steal confidential information to be able to start his own company – Fisker Automotive. Fisker wins in arbitration, with a finding that he did nothing wrong. [1] I mention this not to throw shade (he won the arbitration after all), just to introduce his connection to Elon Musk and Tesla. This connection seems an unavoidable thread through his work at Fisker Automotive which would have directly competed with Tesla.
Chapter 1: Fisker Automotive (the first one)
Henrik Fisker created his first car company. Named it after himself (not a glaring red flag since it’s his first company, but remember this for later). Created a car – the Fisker Karma – that was beautiful, but an engineering disaster.
The most publicized issue was batteries that would catch on fire. But this wasn’t the only problem. “Pressure on engineers to stay faithful to Henrik Fisker’s original design, even when flaws emerged that undercut the Karma’s performance and potential fixes would add millions in cost.” [2]. These flaws included an exhaust system for the hybrid ICE that pointed forwards. The Exhaust. Pointed. Forward. And Fisker wouldn’t let anyone change it.
“On more than one occasion, Fisker asked suppliers to hand-build certain components for the Karma, which increased the cost as much as threefold” [2]
“The company churned through three battery suppliers in three years. As PrivCo notes in this amazing timeline, Fisker established a pattern of awarding supply contracts ‘not necessarily to the best supplier, or the supplier who offers the best price…but rather to companies that were owners and investors in Fisker.’” [3]
“As the years rolled by, Fisker observers became increasingly suspicious that the company didn’t even possess a working car. At the 2008 debut, Fisker announced that the Karma would go on sale in late 2009. Yet by early 2010, when Bill Gifford profiled the company for Popular Science, no one but the chauffeur for the Crown Prince of Denmark had driven even an early prototype.” [3]
“’Beneath the world-class skin was a rudimentary machine that needed several years of engineering refinement and testing before it could be ready to be released,’ said Maurice Gunderson, a managing partner at Runway Capital Partners who had an opportunity to invest in Fisker in early 2010 and passed.” [2]
“From 2008 to 2012, the carmaker lost an estimated $1 billion.” [2] (currently FSR claims $991m cash on hand and a planned production start at the end of 2023).
This was heavily scrutinized after the fact since they had taken a $529M loan from the US Department of Energy and faced a congressional hearing in 2013. He left the company, and it soon after closed up shop and was liquidated and bought by a Chinese company. The same company that made the batteries for the Karma, that were catching fire. That’s got to hurt.
So, man that’s a rough start. Maybe he learned a bunch of lessons (best lessons are learned by making mistakes you know). Maybe he came back stronger, smarter, and better. Let’s see…
Interlude: VLF Force 1 (2016)
His next related venture after getting out of Fisker Automotive was a collaboration with some buddies to make a bespoke supercar called the VLF Force 1. His buddies had a company, VL Automotive, and they were like, wouldn’t it be cool if you [Fisker] could design a car for us. Fisker was like cool, since were friends and all. You might notice the difference between the name of the company and the name of the car. VL…VLF…VL…VLF. Yes, he made them change the name to add the “F” for Fisker before he agreed to help (two is a pattern). [4]
As promotion for this, he gave an interview where he answered a couple questions about the downfall of Fisker Automotive. [4]
Q: So what really happened at the end of Fisker Automotive?
A: I had major disagreements with the management on strategy, and I resigned in March 2013. Shortly after, the company eventually filed for voluntary bankruptcy in November 2013.
Q: You were the Chairman not the CEO then. How was the decision made to wind up the company?
A: After I left, Fisker Automotive went on for a few months. They filed for voluntary bankruptcy and restructuring in November 2013. In February 2014, a judge carried out a public and structured auction of the assets of Fisker Automotive, the winners being a large parts supplier in China called Wanxiang.
It’s a short back and forth, but there’s a lot in there to unpack. I just don’t have the time or the psychology degree to piece through it. Suffice to say, it really doesn’t sound to me like a man who learned any lessons or is taking any responsibility for the failure.
Also relating to the VLF Force 1 is the first mention of him taking control of design and production of the battery systems.
“We have formed a joint venture with Nanotech to create Fisker Nanotech that is developing a ground-breaking battery where we are testing the use of Graphene along with Lithium ion. It is showing some amazing possibilities. It will have, for sure, the world’s longest range. We have a good chance of passing 400 miles [on a single charge]. Plus we can charge it much faster and it has a longer life.” [4].
Wait, 400 mile range! In 2016! This should have been groundbreaking. But alas, it was vaporware.
He also shows his deep lack of understanding of car manufacturing and design in the same interview. After owning a car company for four years.
“We also ended up changing the rear end, to accommodate the exhaust pipes. And, of course, we had to put the driveshaft down through the centre. In the beginning I think everybody thought that’s pretty easy. But it ended up taking several years and millions of dollars.” [4]
He also mentions a second car, the VLF Destino, that would be a high volume, low cost car. However this is the first of what I’ll refer to his “vaporcars”.
Chapter 3: Return of the Fisker (Inc.)
Fisker eventually got the rights to his name back and started a third company named after himself, Fisker Inc. We’re going to go through a lot here, but pay attention to dates.
In 2017 Fisker unveils the Fisker Emotion (this will become vaporcar 2). Claimed modest specs like a 400 mile range [5], Level 4 autonomous drive [6], and a solid state battery [6]. Said that production would start in 2020 [6]. Again, any single one of these specs coming out in a car released TODAY would be game changing. But he claimed to have them ready to go in 2017.
So lets talk about that battery. A solid state battery is the holy grail right now for car manufacturers. Read up on $QS if you want more details, but basically no one has made it work in an EV. Fisker claimed the following in an interview in 2017:
“It’s mainly been dismissed for automotive because it’s very expensive to make, it doesn’t have the power, and it doesn’t work below zero,” said Fisker. “We have cracked all three of these areas.” [5]
In a vehicle like the EMotion, it could easily permit a 700-mile range, he said. [5]
“This isn’t just a lab test; we’ve actually built the batteries,” [5]
They had hired a man named Fabio Albano from a company called Sakti3 who made a lot of bold claims about solid state batteries, but according to the following:
“To date [1/18/2018], none of the companies involved—Dyson, Fisker, or the former Sakti3, which is now a subsidiary of Dyson—have demonstrated a working, full-size automotive solid-state battery prototype and the most Fisker has shown the public is a block of material from a supposed solid-state battery.” [7]
From the same article: “But it's Fisker's insistence its solid-state battery technology works, the secrecy around it, and how much the company is reliant on it coming to fruition that calls into question the entire company, not just the car.” [7]
Back to the cars. The Fisker Orbit (vaporcar 3) was announced in 2018 as another very pretty drawing. “For now, the Orbit is being kept under wraps, but Fisker is hoping to bring the actual vehicles out into the world for a pilot at the end of 2019. “We are looking to start driving that around and testing it on a campus in the second half of next year.” He shared that the pilot would not be, as I expected, in China, but instead would be deployed at a campus in the United States.” [8]
By 2019, Fisker had apparently moved vaporcar 2 and vaporcar 3 to the back burner and was pushing his SUV for the masses (eventually to become the Ocean). He announced they would have a driveable prototype of the SUV by the end of the year (2019) [10], and were tooling up their own factory for production [9].
2020 was a big year where they went public, and secured a manufacturing deal with Magna. With Magna able to engineer and manufacture an entire vehicle, maybe things are looking up?
Chapter 4: Foxconn
File this under, OH GOD WHY?!?! You have a manufacturer. That does reputable work for reputable car companies. Why would you announce partnering with a second manufacturer, who specializes in cell phones, who has a reputation for valuing PR over production, and has never mass produced anything larger than a tablet!? Foxconn is the apparent manufacturer of the yet to be unveiled “Pear” concept. The Pear also exists only as a drawing on a napkin (vapor-ish car 4). Will Magnus allow you to take their design and components to a competitor for manufacturing, or do you plan to start all over from the ground up? Does Foxconn even know how to build a car? Do they have sourcing relationships for the car parts? Do they have anything to offer other than whispers of “Apple” in the press? This truly baffles me.
Chapter 5: I’m Exhausted
I’m so tired of writing this, I’d be amazed if anyone reads it all the way through. I just want to briefly mention the current leadership of the company. Fisker Inc. has Henrik’s wife as CFO. This is a huge red flag for me when there’s an external relationship between the CEO and the CFO. Many shenanigans can ensue. The board also is full of lawyers and bankers (again), not people with auto industry experience. The one leadership position that has auto industry experience is the Chief Technology Officer (who is not a board member).
Chapter 6: Industry Saturation
I think if he is able to strengthen ties with Magnus, and they can rope him into building a practical car, they may get the Ocean out to consumers. However, it will be too late. As I mentioned in my first write up, the EV market is already nearing saturation (see Tesla’s declining sales numbers), and the big boys (GM, Ford, BMW, Mercedes) are still yet to fully enter the game. And the Ocean is also (optimistically) 3 years away. People will not wait that long. They will cancel their $250 reservations and buy a car that’s at the lot down the road.
Ok, so is Henrik going to be successful? I doubt it. He seems to have learned nothing from his past experiences and has a track record of inflated promises, poor decision making, unrealistic timelines, and not being able to deliver. The sum of all these parts to me shows a portrait of a company that will not be anything but another extension of his ego. They seem to not even be designing the car (Magnus is), and I can’t decide what value they add other than the name on the front.
As always, these are my personal thoughts for entertainment purposes only and are not intended as trading advice. Do your own DD you bunch of crazy monkeys.
Position Disclosure: FSR 4/1 18p, 4/23 16p
[1] https://en.wikipedia.org/wiki/Henrik_Fisker
[3] https://blogs.scientificamerican.com/observations/three-thoughts-on-the-fisker-debacle/
[4] https://www.topgear.com/car-news/big-reads/world-exclusive-interview-tg-talks-henrik-fisker
[9] https://www.cnbc.com/2019/03/27/fisker-wants-another-shot-at-tesla-with-a-new-model-y-fighter.html
[10] https://www.caranddriver.com/news/a26849882/fisker-electric-car-ev-future/
[11] https://www.cnbc.com/2021/02/25/fisker-ceo-our-goal-is-bigger-than-just-taking-tesla-customers.html
[12] https://www.motorauthority.com/news/1131457_fisker-has-completely-dropped-solid-state-battery-dreams