Troubled electric vehicle (EV) startup Fisker (NYSE:FSR) has engaged restructuring advisers in preparation for a potential bankruptcy, the Wall Street Journal reported on Wednesday.
FSR shares crashed over 35% in after-hours trading Wednesday.
The company, confronting the risk of depleting its cash reserves this year, has enlisted FTI Consulting for financial advice and law firm Davis Polk for legal guidance on the possible bankruptcy process.
Last month, Fisker reported $273 million in sales for the previous year, against a backdrop of over $1 billion in debt.
Moreover, Fisker issued a warning about its ongoing viability, expressing "substantial doubt" regarding its ability to continue operations. The firm is actively seeking to secure more funding from investors and to find a new manufacturing partner within the U.S.
The Manhattan Beach, California-based EV maker delayed its full financial report for the past year in late February. The move was attributed to a shortage of seasoned accounting professionals, as stated in a regulatory filing.
Fisker made its stock market debut in the early 2020s through a merger with a special-purpose acquisition company (SPAC), part of a wave of EV firms capitalizing on investor interest in following Tesla's (NASDAQ:TSLA) success.
However, these companies have since faced significant challenges in mass production and a decline in demand for EVs among American consumers.
The company, which began delivering its first vehicles in the U.S. in June, has seen signs of weakening sales growth, leading to reductions in its demand forecasts and price adjustments in response to market competition.
Should Fisker enter bankruptcy protection, it would mark the second failure for founder Henrik Fisker, a renowned car designer.
The carmaker’s share price has crashed 97% since 2020, putting it at risk of being removed from the New York Stock Exchange.
Recently, Fisker announced a 15% reduction in its workforce, affecting primarily service and retail sales staff.