The sad long story of Fisker Automotive, ‘the largest VC-backed debacle in U.S. history’

In January 2005, legendary car designer Henrik Fisker founded a company to bring innovative new thinking to the automobile industry.

Between that date and today, Fisker Automotive would create perhaps the most beautiful car ever made, raise almost $1.4 billion dollars from investors as diverse as Leonardo di Caprio and Kleiner Perkins, obtain a $528 million loan from the U.S. Department of Energy, balloon to 600+ employees, default on loans or investment conditions at least four separate times, spend $535,000 on a website, get sued by its own employees, get evicted from its primary business location, and be investigated by the government — apparently for its incredible ability to burn a billion dollars while delivering only a few thousand actual completed cars.

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What a wild, crazy ride it’s been.

“Fisker spent a stunning $900,000 for each vehicle it produced,” PrivCo chief executive Sam Hamadeh told me. “Then they sold them to dealers for an invoice price of just $70,000.”

PrivCo, a research firm focused on non-public companies, has compiled an exhaustive dossier on Fisker, its cash, its commitments, and its massive failure to produce anything like a functional, profitable business. While burning through $1.4 billion dollars, Fisker produced fewer than 2,200 cars, PrivCo data shows, 600 of which remain unsold on dealers’ lots. And 1,200 investors, which include university endowment funds and company pension plans, are learning that their cash has been completely wiped out.

Even worse?

The government was grossly negligent in its issuing of the Fisker loan, Hamadeh maintains, saying that Fisker is the biggest public loss since the infamous Solyndra Solar debacle, which cost the government as much as half billion dollars. Not only did the U.S. Department of Energy apply “negligent underwriting standards” in granting the Fisker loans, it also failed to enforce the loan conditions as Fisker breached the loan terms, PrivCo says. That failure cost the U.S. taxpayer an extra $192.3 million.

That’s bad enough. But sadly, it gets even worse.

Even as Fisker continued private fundraising efforts, when the DOE privately issued a Drawdown Stop Notice to halt payments to the stumbling car company, it failed to warn future investors that Fisker was in default. As PrivCo writes in its report:

U.S. Department of Energy made no announcement to the public that Fisker was in Default of Its Loan and Credit Agreements and no longer had access to the remaining balance of $336.4 Million, resulting in continued reliance on hundreds of additional individual investors purchasing Fisker stock in the hundreds of millions of dollars through the Advanced Equities “Fisker Funds” limited partnerships as well as reliance on that reasonable assumption that Fisker had continued and substantial access to the remaining $336.4 Million of credit line liquidity through the U.S. government.

At the end of the long, sad story, Hamedeh says, Fisker has less than $20 million cash in hand, has stopped paying all creditors, and faces multiple lawsuits.

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“Fisker Automotive may well go down as the most tragic venture capital-backed debacle in recent history,” Hamadeh said in a statement. “The sheer scale of investment capital and government loan money — over $1.3 billion in all — was squandered so rapidly and with so little to show for it that the wreckage is breathtaking. Bankruptcy will be the end of Fisker, but for the taxpayers, venture capital firms, individual investors, and Fisker’s suppliers, it will all be too little too late.”

Here’s the long sad tale in infographic form: