Since its introduction as a merger target of a special purpose acquisition company, I’ve generally been positive of Fisker (NYSE:FSR). I better be as I own FSR stock.
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True, the underlying electric vehicle automaker has always carried risks, and while I’ve criticized aspirational pre-revenue companies in the past, Fisker is the embodiment of an aspirational investment.
Have I lost my mind by putting my own money at risk with this risky name? Admittedly, the critics have plenty of ammunition to make their case.
After closing near $30 this past February, FSR stock went on to make a sickening collapse. In hindsight, the dead-cat bounce in the second week of March was the first opportunity to cut losses.
From there, it’s been virtually nothing but an ugly ride. At one point in May, FSR stock closed in single-digit territory, below the $10 price where SPACs typically are born. The volatility also proved that Fisker, despite what I believe offers a compelling business, could not overcome the SPAC disaster that has become epidemic in the reverse-merger market.
On a side note, I think bulls and bears agree that companies considering an initial public offering may want to rethink the SPAC route.
Though not in the same industry, the investment community generally gravitated toward Virgin Galactic (NYSE:SPCE). But a severe decline in valuation from roughly mid-February to mid-May of this year quickly dampened sentiment.
As it turned out, sponsors and other insiders have serious, perhaps undue influence over their SPACs. Therefore, it may be difficult for retail buyers to accrue sustainable profitability, whether we’re talking about FSR stock or any other SPAC.
Nevertheless, despite its woes (and there are many, including that it probably won’t have an EV out until the end of 2022 and thus could be entering too late into the game) I’m sticking with Fisker. Here’s why.
FSR Stock Tied to Key Purchasing Decision-Maker
Because Fisker won’t have any revenue on its books for some time, it’s easy to view FSR stock as a pure money pit. Why bother with Fisker when you have so many options that are building and selling EVs right now? Also, with the wave of major competitors entering the market, Fisker stands a real risk of being lost in the sea.
Nevertheless, I think critics overlook the man whose name the company bears, Henrik Fisker. Fisker the man designed some of the most iconic cars in the world, including my personal favorite, the BMW (OTCMKTS:BMWYY) Z8.
Combining elements of the past with modern accouterments, the Z8 became an instant classic. Let’s just say you’re doing well in life if you have one of these bad boys in your garage.
But the thing about Fisker-designed cars is that they tend to be listed in the elite side of the automotive spectrum. They can also rise in value, as did the Z8. Therefore, with the upcoming Fisker Ocean SUV, this is a chance for regular folks to drive a Fisker-designed vehicle.
Remember, the Ocean will aim to price at under $38,000, which isn’t cheap but certainly isn’t unrealistically unattainable.
Moreover, some analysts underestimate how important aesthetics are in the purchasing decision. It’s no surprise that the most successful EVs are also lookers — they were designed that way intentionally. When cars start to approach the $40,000 level and beyond, consumers are more discerning.
Therefore, what one might consider a disadvantage I consider a possible advantage. Nothing this side of a Jaguar or Land Rover looks like the Fisker Ocean, yet the latter is electric and reasonably priced.
Looks Start the Conversation
If you’re skeptical about the aesthetic catalyst, consider your own purchasing behaviors. Recently, I took advantage of the crazy used car market and the extreme bullishness toward Japanese cars and bought myself a BMW X3. It had everything that I was looking for — but the conversation started with its looks.
I immediately scrubbed the rival Audi Q3 from my list because its proportions are all wrong. Similarly, I dismissed Japanese and American SUVs for their lack of design inspiration, but the X3 had the right design language.
Further, upon the test drive, the driving dynamics were absolutely incredible, which sold me, but again, the journey started because of the X3’s great looks. And that’s not just my opinion — the X3 consistently ranks as one of the most popular BMW models.
Yes, EVs will become an extremely competitive and cutthroat arena. I guess the difference for me is that I don’t necessarily see Fisker as the victim in this paradigm.
On the date of publication, Josh Enomoto held a LONG position in FSR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.