Fisker Inc. will shut down operations under a bankruptcy plan approved Friday that should allow car owners to drive their cars for years, paying nothing to shareholders who were wiped out by investing in the defunct Southern California electric vehicle maker. .
The plan approved by U.S. Bankruptcy Court Judge Thomas Horan in Delaware comes as Fisker is dealing with a Securities and Exchange Commission investigation into possible securities violations at the company ahead of its bankruptcy filing in June.
Fisker revealed in August that he had been subpoenaed by the SEC, which recently confirmed it was investigating the company and demanded that the bankruptcy plan preserve records.
“The SEC has been much more aggressive in pursuing its complaints and remedies, even if the focus of its investigation has been filed for bankruptcy,” said Jennifer Lee, a former deputy director of the SEC's Division of Enforcement who now practices in the private sector. .
The agency has declined to comment on its investigation.
Co-founders Henrik Fisker, the company's president and CEO, and his wife, Geeta Gupta-Fisker, chief financial and operating officer, and other officials face multiple lawsuits from shareholders.
The plaintiffs allege violations of fiduciary duties and securities laws, including media appearances by Henrik Fisker touting the company's prospects even as his fortunes declined.
Horan issued his ruling after a series of filings, hearings and closed-door meetings this week as Fisker, its creditors and owners reached a deal.
Fisker Owners Association Leadership. came out last week in favor of the proposed plan, saying the automaker had made progress in addressing open recalls Fisker had issued for its Ocean SUV and had engaged in “constructive dialogue” on maintenance issues.
The approved plan also resolved the National Highway Transportation Safety Board's concerns about how to pay for the costs of recalls, including one for malfunctioning brakes and another for a faulty water pump. Under the approved plan, Fisker's estate will cover those costs.
Another issue that was resolved was access to Fisker's cloud server for the over-the-air software updates that the Ocean must receive to function. Access to those updates will be provided by American Lease, a Bronx, New York, company that leases Uber and Lyft cars. He bid $46.25 million for Fisker's unsold inventory of more than 3,000 cars.
American Lease agreed late this week to pay $2.5 million for cloud access over five years and will share that access with Fisker's more than 6,000 car owners for an undetermined price.
“We are happy with the current outcome and are optimistic about the future,” said Brandon Jones, president of the homeowners association. “It still takes some discussion and negotiation, but we will have the services we need to maintain our cars.”
Founded in 2016, Fisker went public in 2020 through a special purpose acquisition company backed by private equity firm Apollo Global Management. The company raised $1 billion in equity capital and borrowed even more, but ran out of money.
Manhattan Beach-based Fisker moved to La Palma in Orange County earlier this year.
Henrik Fisker, a prominent automobile designer, envisioned the company's debut model, the Ocean, as a competitor to Tesla's Model Y, but the company had trouble manufacturing and delivering the high-tech SUV. The Ocean was plagued by software glitches, although its handling and construction were praised.
Several thousand car owners were eligible to vote on the plan, because they had filed claims against Fisker, making them unsecured creditors.
Evan Scott, 39, filed two claims, one for nearly $28,000 based on the loss in value of his Ocean after price cuts, and a second for $1,000 after his car was delivered with defective tires that had have to be replaced after four months. He said he voted in favor of the plan, but feels he was misled by the company after purchasing about $50,000 in stock, which is now worthless.
“Everything they said for the last six months was a lie and they knew they were going to file bankruptcy,” the Portland, Oregon, resident said.
Fisker shares hit a high of $28.50 in March 2021 amid peak interest in electric vehicles and a stock bubble that burst following an interest rate hike the following year. At the time of Fisker's bankruptcy, its shares were trading for five cents.
The base model of the Ocean sold for $38,999 and the fancier version cost more than $60,000, until a series of steep price cuts. American Lease purchased its fleet of Oceans for about $13,900 per vehicle.
Fisker filed for bankruptcy after failing to secure a strategic investment from an automaker Reuters identified as Nissan. He also failed in his efforts to sell the company to other buyers. It estimated liabilities of up to $500 million and assets between $500 million and $1 billion at the time of the filing.
It is being liquidated under Chapter 11 of the bankruptcy code typically used by companies seeking to restructure and stay in business. However, the process has allowed management to maintain control of the company's daily operations while resolving recalls and other issues.
By the time the bankruptcy plan was approved, more than 4,000 lawsuits had been filed against Fisker, including two totaling more than $1 billion: one for $694 million in debt from US Bank and a second for $475 million in debt from Magna. International, which manufactured the ocean for Fisker in an Austrian plant.
Fisker has yet to sell the assets it owns in Austria, as well as its intellectual property, including vehicle designs and software code, which could theoretically be purchased by another automaker to produce the Ocean and other vehicles it Fisker had planned. The proceeds from those sales will go into a trust, with the majority going to the company's secured creditor.
That creditor is CVI Investments and its investment manager, Heights Capital Management Inc., affiliates of Susquehanna International Group, a large Pennsylvania trading firm founded by billionaire Jeff Yass. He has a secured claim of more than $180 million from the debt he owes Fisker.
Several shareholders sent letters to the court requesting an SEC investigation into Fisker's dealings with the creditor, whose position as a secured lender had encountered opposition from unsecured creditors earlier in the bankruptcy process. Lawyers for CVI have not responded to requests for comment.
Car owners seeking compensation may have other avenues to recover funds for loss of warranty protection, mechanical and software problems, and other issues.
The Hagens Berman law firm is filing arbitration cases against JP Morgan Chase Bank, a major maker of Fisker auto loans. Partner Steve Berman said his firm is processing about 1,300 individual arbitration claims. Chase declined to comment.
