Fisker Bankruptcy Plan Approved: Warranty Repairs & OTA Updates Continue Operation of Vehicles

Fisker Inc. is going to start leaving the market under a bankruptcy plan approved by U.S. Bankruptcy Court Judge Thomas Horan. The plan, enables car owners to continue driving their vehicles, offers no compensation to shareholders, who have lost their investments. Fisker is also facing an ongoing investigation by the Securities and Exchange Commission (SEC) for potential securities violations, which began before the company’s bankruptcy filing in June.

The SEC has demanded that Fisker’s bankruptcy plan preserve all company records as part of its investigation. Fisker disclosed in August that it had been subpoenaed by the SEC, which is now aggressively pursuing its case. Co-founders Henrik Fisker, the CEO, and his wife Geeta Gupta-Fisker, the chief financial officer, along with other officials, are also facing shareholder lawsuits. These lawsuits allege violations of fiduciary duties and securities laws, with claims that Henrik Fisker made optimistic statements about the company’s prospects while its financial situation worsened.

The bankruptcy plan, finalized after intense negotiations among Fisker, its creditors, and car owners, has resolved key issues, including recall costs for the Ocean SUV. Fisker’s estate will cover the expenses of addressing malfunctioning brakes and a defective water pump. Additionally, a solution was found for maintaining over-the-air software updates, essential for the Ocean’s continued operation. American Lease, a New York-based company that leases Uber and Lyft vehicles, purchased Fisker’s remaining inventory of over 3,000 cars and agreed to provide cloud access for these software updates for five years.

Several thousand Fisker car owners participated in the vote on the bankruptcy plan. Some of these owners, filed claims against Fisker due to vehicle issues and significant price reductions. Many contend they were misled by the company after investing heavily in its stock, which is now worthless.

Fisker went public in 2020 through a special purpose acquisition company (SPAC) after raising $1 billion in equity capital. Despite these funds, the company eventually ran out of money due to production and delivery issues with its flagship vehicle, the Ocean SUV. The vehicle was seen as a competitor to Tesla’s Model Y, but persistent software glitches and other technical problems hampered its success. Fisker’s inability to secure strategic investment or find a buyer led to its bankruptcy filing, with liabilities estimated up to $500 million.

The bankruptcy plan allows Fisker to liquidate under Chapter 11, typically used by companies seeking to restructure. However, Fisker’s assets, including its intellectual property and vehicles, are expected to be sold. Proceeds from these sales will primarily go to secured creditors, including CVI Investments, which holds a claim of over $180 million.

The bankruptcy plan has left shareholders without compensation, while car owners may pursue other avenues for recouping losses, such as arbitration cases against financial institutions involved with Fisker. Legal proceedings are already underway, with the law firm Hagens Berman representing over 1,300 individual arbitration demands against J.P. Morgan Chase Bank, a key lender for Fisker auto loans.

Fisker on LinkedIn listed for the following job in Manhattan Beach, one week ago:

If you work or have worked at Fisker and know what is going on–please let us in the comments below.