Electric-vehicle start-up Fisker (NYSE:FSR) recently completed its reverse merger, and shares of FSR stock rose impressively. The gains rewarded those who speculated that the market would welcome another contender in the crowded space.
Despite the stock price’s initial climb, it’s way too soon to predict whether Fisker (or any of the other new companies) have what it takes to survive. The auto business is a difficult one. Even in the good times, the industry is continually challenged on many fronts, which tests every company without regard to its previous performance.
Companies like Fisher serve a valuable purpose, however, since they can push the envelope in terms of development and innovation without interference from a corporate bureaucracy.
In addition, the electric-vehicle arena is enjoying the attention of the stock market looking for the next Elon Musk.
FSR Stock Gains Altitude
As my InvestorPlace colleague Will Ashworth notes, the post-merger increase posted by FSR stock may well prove to be the easiest part of the company’s journey.
But that increase is noteworthy.
Fisker completed the reverse merger with Spartan Energy Acquisition Corp. on Oct. 29, 2020. Despite its name, Spartan had no connection to the energy sector. Instead, it was a special purpose acquisition company and went public with the sole “purpose” of merging with a private company. After the merger, Spartan disappears and Fisker trades on the stock market.
SPAC mergers are the rage these days, and not just in the electric-vehicle segment, though it is the favored route there. The significant lack of red tape makes a SPAC merger attractive. Time will tell if the strategy is a more efficient way to reach the markets or a loophole that penalizes investors.
FSR stock established a range so far of $8.70 to a high of $21.60. Currently, shares are trading around $16.
Fisker’s market capitalization is about $4.5 billion.
What Sets Fisker Apart From the Crowd
Potential investors wondering why Fisker deserves their attention get a major clue in the company’s name.
This firm results from the gifted drive of Henrik Fisker. He is a veteran designer of impressive vehicles. He also spent years trying to build a company that produces environmentally friendly vehicles that not only look neat but spare the planet.
Fisker’s designs clearly demonstrate his talent and that consumers like the vehicles he creates. Josh Enomoto wrote in InvestorPlace that discerning consumers likely will embrace Fisker’s work as the segment sees more entries that are cheaply made and plain.
Enomoto rightly describes Henrik Fisker as a legend.
While having Fisker as the force behind the company sets its product apart, the fact remains that this is his second attempt to launch a vehicle company. Investors should acknowledge the risk that comes after Fisker’s first company failed. Several observers say the failure was not his fault. Supporters of the new company must agree or are convinced lessons were learned that will pay off this time.
One more factor that sets Fisker apart. The company says its flagship SUV, the Ocean, will be made with an extraordinary amount of recycled materials, such as plastic bottles and even tires.
The Bottom Line
At first glance, the Fisker electric-vehicle company may appear just another start-up destined to be a flash in the pan. That assumption, though, may be quite wrong.
At its back, the company has the brilliance of its namesake, Henrik Fisker, a name that earned respect in automotive design circles. He is committed to produce a vehicle that not only goes easy on the planet as it is driven but also as it is made. This use of recycled materials will set an example for other companies and could make a meaningful difference.
Fisker also contracted an established manufacturer to make its vehicles.
The Fisker company remains a risky investment, but it has more going for it than several others.
On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C.