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FSR Stock Alert: Fisker Embraces Dilution to Pay Down Debt

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Fisker is still on the hook for $324.5 million of 0% senior secured convertible notes due in 2025

Source: T. Schneider / Shutterstock.com

Fisker (NYSE:FSR) stock is surging higher after the company announced that it had enacted an amendment and waiver agreement with an institutional investor that owns its 0% senior secured convertible notes due in 2025. On July 10, the two parties agreed to enter into a Securities Purchase Agreement in which the investor would purchase $510 million of convertible notes, which is a form of debt.

The first change stipulates that, if Fisker decides to collaborate with a strategic original equipment manufacturer (OEM) partner, any intellectual property (IP) liens granted to the investor will be released. This change opens up the door for Fisker to collaborate with OEMs in a more flexible manner.

The second change in the agreement releases all financial covenants in regards to Fisker’s cash reserves. Fisker is now free to use this cash for its operations.

FSR Stock: Fisker Agrees to Amendments and Waiver with Institutional Investor

Finally, the last change is that Fisker acquired a waiver from the investor that frees Fisker from any obligations due to its late earnings report for the quarter ended Sept. 30.

As of Jan. 19, the investor still owned $324.50 million of the notes, down from the initial $510 million. The $185.50 million difference was converted into 159.06 million shares of FSR stock.

“I am pleased that we were able to reach an agreement with one of our investors that will provide increased flexibility and better position us to execute on potential strategic business deals,” said Fisker CEO and Chairman Henrik Fisker.

These changes are undoubtedly beneficial for the electric vehicle (EV) company, although it also signals that more note conversions are likely on the way.

Last week, the company announced that it would cooperate with the National Highway Traffic Safety Administration’s (NHTSA) Office of Defects Investigation (ODI) on its preliminary evaluation (PE) into the braking performance of the 2023 Ocean model. The PE was initiated following nine complaints concerning a partial loss of braking performance on low-traction surfaces. Fisker noted that its brakes comply with all regulatory requirements following an over-the-air (OTA) update in December.

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On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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