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Fisker will be offering $170 million in convertible notes.
Courtesy Fisker
Electric vehicle start-up
Fisker
is raising more capital. The shares bounced after an initial drop in the Friday premarket session.
Fisker
(ticker: FSR) announced its intention Friday to offer $170 million in convertible notes due in 2025, which will net the company about $150 million in cash. The notes pay no interest, so Fisker is selling them at a discount to face value to give investors a return.
Given that the discount is about 12%, holding the bonds to maturity would net an investor a little less than 6% a year, on average. That might not be a good return for a bond of a company that doesn’t make money yet, but there is also the chance that the bonds can be converted into stock if shares do well.
That option is worth something. Holders have the option to convert the notes at $7.60 a share, which would make sense if the stock price rises that high.
Fisker stock was down about 4% in premarket trading, but roared back for a gain of more than 3% in the regular session. By midday, they were down 0.6% at $6.36. The
S&P 500
and
Nasdaq Composite
were up 0.4% and 0.9%, respectively.
Offering convertible notes, or stock, which isn’t unusual, tends to sends stocks lower. More shares outstanding mean existing shareholders own a little less of the company than they did before the offering.
If the bonds were all converted to stock, that would be another 19.7 million shares. Fisker has about 343 million shares outstanding.
If the bonds don’t convert into stock, Fisker has to pay them back. The notes are due in a couple of years. Fisker isn’t expected to be profitable by then. But there are no interest payments to make, preserving Fisker’s cash between now and then.
Fisker’s cash at the end of the second quarter totaled about $522 million. That excluded $300 million in proceeds from a July convertible note offering and $33 million in tax refunds.
Wall Street projects Fisker will use about $100 million a quarter for the coming few quarters.
Coming into Friday trading, Fisker stock has risen about 14% this week. Fisker announced Tuesday it had made 5,000 Ocean SUVs, with its partner
Magna International
(MGA), and that the company expected to ramp production up to 300 units a day in the fourth quarter. Taken together, the data points imply that Fisker can reach its 2023 production guidance of 20,000 to 23,000 units.
Fisker stock has fallen about 12% over the past 12 months.
Write to Al Root at [email protected]
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