- Henrik Fisker has bounced back from the demise of his first car company, Fisker Automotive, with Fisker, Inc.
- Fisker, Inc. recently went public at a $3 billion valuation that quickly shot up to over $4 billion.
- The deal used a once-derided but now popular investment vehicle called a SPAC to execute a reverse-merger and list Fisker on the NYSE.
- The SPAC deal has given Fisker $1 billion to bring its Ocean SUV to market by 2022.
- Here’s the inside story of how Fisker and Apollo Global Management made the deal happen, in record time.
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Henrik Fisker is a study in resiliency.
The demise of his first company, Fisker Automotive, in 2013 was a major setback, but it didn’t prevent the Danish-born designer and entrepreneur from staging a second act in the auto industry. In 2016, he founded Fisker, Inc. and started raising funds to build an all-electric sports sedan, the EMotion.
By 2019, Fisker, Inc. had evolved into a different kind of startup, with a new vehicle under construction: the Ocean SUV. But Fisker knew he was going to need to raise a lot of money to build it — a billion dollars more.
Fisker had already gone the traditional venture capital route, with Fisker Automotive, and wasn’t eager to do it again. “You raise the $100 million, but you still have to raise the billion,” the CEO, 57, said of the quest to round up private funders.
Instead, he began to concentrate on the revival of a formerly spurned type of deal, a reverse-merger with a “special purpose acquisition company”, or SPAC that could generate the big money that getting the Ocean to market would require.
A major player comes into the game
Enter Apollo Global Management. The investment colossus, co-founded in 1990 by Leon Black and a group of Drexel Burnham Lambert refugees, has more than $430 billion under management, so in the grand scheme of things, the roughly $550 million that the firm organized in 2019 to capitalize its SPAC fund, dubbed “Spartan 1,” wasn’t eye-catching.
But in the realm of electric-vehicle startups, the SPAC captured plenty of attention when it announced in July that it would combine with Fisker, Inc., establishing a $3 billion valuation for the company. More importantly, it would raise the funds that the startup would need to bring the Ocean to market by 2022.
The reverse-merger was engineered by what finance insiders call a “blank check” firm that’s basically a team of investors looking for something to buy. Apollo initially set up Spartan as an energy SPAC, but investor enthusiasm in that space was lacking.
In early 2020, however, there was considerable momentum in the auto sector, with GM announcing an ambitious electrification strategy and unveiling is new Ultium battery technology, and with Tesla’s share price going ballistic, eventually making it the most valuable automaker in the world, worth $400 billion and winning CEO Elon Musk’s company a coveted place in the S&P 500 index. At the same time, governments around the world were starting to demand a phase-out of the internal-combustion engine.
So Spartan’s managers started looking for a carmaker. Or more accurately, they took another look at a carmaker they already knew about.
Various SPACs were kicking Fisker’s tires
“In 2019, we were doing a roadshow to raise private money to build the first prototype of the Ocean,” Fisker said. “We went to New York and talked to several banks, and we met with Apollo. But nothing came of it.”
At the time, another SPAC was also kicking Fisker’s tires. It was VectoIQ, a fund set up by former GM board member Steve Girsky. That SPAC would in June of 2020 merge with Nikola, a hydrogen-and-electric pickup-truck startup, raising $700 million and later attracting GM to the deal in exchange for an 11% equity stake and the opportunity to build Nikola’s Badger vehicle using the Ultium battery-electric platform. (Girsky didn’t immediately respond to a request from Business Insider to comment on VectoIQ’s interest in Fisker.)
As a result of all the interest, Fisker’s leaders — consisting primarily of Henrik as CEO and his wife, Geeta Gupta-Fisker, as CFO — decided the SPAC route was their best bet. While discussions with VectoIQ were taking place, Fisker’s main banker, Cowen, was putting the word out. Other SPACs started checking out the carmaker
“We went into very deep discussions with a particular SPAC, not a known group,” he said. “We were quite far along and thought, ‘This looks like it could be it.’ But suddenly, we got a call from Apollo. They remembered us and were interested because the whole SPAC thing was heating up.”
From there, the deal moved fast. And Fisker stayed out of the way as Geeta pressed forward. “Long story short,” he said, “She ended up doing a deal over a weekend.”
Apollo remembered the timing being a bit slower — all of a month for the due-diligence period. Ultimately, $1 billion landed on the carmaker’s balance sheet
The deal closed at the end of October, and Fisker, Inc. began trading under its own ticker symbol, FSR, on the New York Stock Exchange. In a matter of weeks, shares have risen over 15%, and the market capitalization is $4.6 billion.
From Apollo’s point of view, the company had in Henrik Fisker found not just an auto industry veteran who had learned his trade the hard way, but an entrepreneur with a vision, not to mention a great salesman.
Giving SPACs a fresh start
SPACs weren’t always such a popular way to take companies public. For much of the past three decades, the conventional IPO-process has been the premier approach, with closely-scrutinized roadshows undertaken by “unicorn” tech startups, tended by marquee Wall Street investment banks and closely followed by the Silicon Valley venture-capital community and the business press.
“Historically SPACs did have a bad reputation — they were viewed as a last resort.” said Patrick Galley, CEO & CIO of RiverNorth Capital Management, a firm that runs $4.4 billion and invests in SPACs through its private funds.
According to Galley, the participation of more credible names, such as Apollo, in the SPAC market has offset the old concerns.
“The SPAC market has been on a tear in 2020,” he said, noting that $65 billion had been raised through November. That’s a nearly sixfold increase over 2019’s $11 billion and 2018’s $10 billion.
The trick is to bring big numbers to the table. If the deal is large enough, the benefits to the early-stage investors outweigh the cost of equity dilution, a sticking point in the past that had discouraged companies from dealing with SPACs.
The SPAC option has certainly been a boon for Fisker, which in addition to the Ocean has revealed two vehicles that will join the carmaker’s lineup.
Pursuing an “asset-light” business model
It’s also been a victory for Henrik Fisker’s somewhat radical ideas about how a 21st-century startup car company should develop its business model. He describes it as “asset-light” — instead of building a factory and assembling the Ocean, Fisker plans to outsource production of Magna Steyr, the Austria-based carmaking arm of Canada’s Magna International.
Magna is the world’s largest contract manufacturer, building some vehicles for the likes of BMW and Jaguar Land Rover. But it’s also now a Fisker shareholder, having taken the option to acquire a 6% stake in the company prior to the completion of the reverse-merger with Spartan.
On the Apollo side, the SPAC managers were captivated by the asset-light idea, with Fisker relying on his well-documented ability to excel at branding and design. They were especially impressed by the Ocean debut at CES in Las Vegas in January, with the 300-mile-range prototype garnering a raft of $250 refundable pre-orders — about 1,000, rising to 5,000 before the SPAC was announced and 10,000 currently — without the company having to spend a dime on marketing
Apollo also appreciated that, with Fisker talking to highly-qualified manufacturing partners, there would be no Tesla-style “production hell” for the Ocean, with the vehicle’s launch delayed by factory slowdowns or “alien dreadnought” misfires.
The Spartan group, with a 5% share of the newly listed Fisker, Inc., has now stepped back from the day-to-day supervision of the company’s financials. They can designate an independent board member, but otherwise, they’ve handed over the keys.
For his part, Henrik Fisker intends to stick around as CEO and concentrate on the nitty-gritty details of design and engineering while he savors his unusual second act in the car business.
“In this early phase, I can’t be hands-off, and we can’t hire a CEO to run things. We have to make visionary decisions. I’m much better prepared than I was 10 years ago with Fisker Automotive.”
He’s even given himself permission to reflect on a job that, thus far, has been well done.
“What’s especially gratifying is that we have the full funds for our first vehicle,” he said. “I know I don’t have to get out on the road to raise more money.
Then he allowed the moment to sink in.
“It feels amazing,” he said.