Electric-vehicle (EV) maker Fisker (NYSE:FSR) is the latest company to hold an initial public offering (IPO) via a special-purpose acquisition company (SPAC). In this case, it was through a merger with Spartan Energy Acquisition Corp. And now that the merger is complete, the EV company’s stock symbol has officially changed to “FSR” from “SPAQ.” Now the question is, can the company convince investors FSR stock is worth their time and money?
Since its debut on Oct. 30, Fisker has seen its stock increase over 50%, opening at $9.25 that day and jumping up to over $14.50 at the time of publication. Let’s take a look to see if FSR stock is worth the hype.
FSR Stock: The Next Tesla?
Every new EV maker that comes to market — and there are plenty of them these days — inevitably gets compared to market-leader Tesla (NASDAQ:TSLA). Fisker is a long way from having the product line-up that Tesla boasts. However, the company does have one electric vehicle that is far along enough in its development to take pre-orders from customers. Fisker’s electric SUV “Ocean” is scheduled to debut at the Los Angeles automotive show in May 2021, with deliveries to customers expected in late 2022.
In this respect, Fisker is further along than many other electric automakers, such as Nikola (NASDAQ:NKLA), that are still at the concept phase. The Ocean is the company’s first production vehicle, and it’s expected to retail for $37,499. The SUV will be powered by electric motors supplied by an 80kWh lithium-ion battery pack and will have a driving range of between 250 and 300 miles on a single battery charge.
There are some other things that make Fisker stock enticing to investors. These include the fact that the company has inked a deal with Canadian auto-parts supplier Magna International to manufacture the Ocean SUV at their European facilities. This plan to outsource production also allows for more focus on the design and marketing.
Plus, a change in presidency could be good news for Fisker and the broader EV market, given that President-elect Joe Biden has said he plans to spend almost $2 trillion on “green energy” investments that include funds to build nationwide charging infrastructure, tax credits for EV purchases and a “cash for clunkers” program targeted toward electric vehicles.
Still, risks remain for investors. Today’s version of Fisker was started by Henrik Fisker in 2016. The previous version of the company, Fisker Automotive, went bankrupt in 2012. Fisker Automotive raised over $1 billion from investors, but only built 2,450 vehicles before going belly-up.
Fisker Automotive reportedly lost an estimated $35,000 per car that it manufactured. And the company had been cut off from taxpayer-subsidized loans from the Department of Energy amid accusations of financial mismanagement. The new Fisker is also entering an increasingly crowded electric vehicle market, bumping elbows with both established automakers and other startups.
Take a Small Position
While increasingly crowded, the EV market is forecasted to be huge in the coming decade. The International Energy Agency (IEA) predicts that electric vehicle use will rise from 4 million vehicles in 2018 to 120 million by 2030. For this reason, investors should try to have at least some exposure to the market.
However, picking the right stocks to invest in can be tricky. Some EV startups will survive and thrive. Many others will crash and burn. For the time being, FSR stock looks like one of the safer speculative plays. But investors should proceed with caution and start with a small position when buying shares.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.