Fisker plunges after talks with large automaker fall through

Fisker (FSR) shares plummet Monday morning after disclosing investment negotiations with the unnamed "large automaker" it was in talks with have fallen through. Yahoo Finance Live examines Fisker's stock and the EV startup's business model after it paused production for six weeks.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

- Also watching shares of Fisker. They're plummeting this morning after the EV startup says the large automaker it was in talks with for a potential transaction has terminated negotiations. Fisker now weighing strategic alternatives, including in or out of court restructurings. Shares are down 28%.

The company has already been going through a massive restructuring of its own business and trying to make sure that they can cozy up to some potential dealers and growing out the dealer network as well. So kind of stepping away from the pure D to C that a lot of-- and really spurred by how well Tesla had been able to do and that, moving away from that and now going directly to, OK, what are the distribution partners and channels that we can work with at the dealer model perspective?

And if that doesn't help them, you've got a question here. Number one, how much longer are we looking at Fisker as a publicly traded company? That is an issue, and any mechanisms that they will need to employ in order to just remain within listing compliance as well. And then two, what sales look like in this near term? I love the names of the vehicles, though. Ocean. I mean, how could you not like that?

- Yeah, well, hopefully, it helps them sell a couple more vehicles here. Because clearly, they are a very strong company. Lots of questions about what the future is even going to look like here for Fisker following this news that's directly reflected in the sell that we're seeing here shortly after the open with shares off just about 30%.

And remember that this EV maker also announced earlier this month that it was going to be pausing production of its EVs for six weeks to raise up to $150 million of funding here after missing an interest payment. So this company is under a tremendous amount of financial strain, tremendous amount of concern going forward about what exactly is going to look like.

We know the cost of EVs. What it takes to manufacture these EVs is very expensive. Demand simply nowhere near where the expectations were up until this point. And then also the competition landscape getting even more competitive. We've seen price slashing by many of the larger players within the space. So the ability for Fisker to compete here without the partnership of a larger automaker here, there's lots of questions about what even this future is going to look like for Fisker specifically at this point.

- Yeah, absolutely. And it doesn't help for the EV industry that report that just came out from JD Power actually this morning, finding out that SUV owners or EV, excuse me, EV owners were uninformed of faster tire wear leading to lower satisfaction here as well. So that, another potential hit in the near term on some of the EV demand that we've seen right now.