Fisker announced recently it was running out of money, and on the verge of bankruptcy slashed the prices of its cars by as much as 39% last week. As it turns out, some of Fisker’s financial troubles could be traced back to millions in customer payments that temporarily disappeared amid its efforts to ramp up the delivery of its Ocean EV.
The situation, which unfolded over several months, resulted in an internal audit that started in December, uncovering a series of internal procedural failings that significantly impacted Fisker’s operational efficiency and financial integrity.
According to a report by TechCrunch, the issue came to light when Fisker realized it had lost track of a substantial sum of money, including both down payments and, in some instances, the full purchase amount of the Ocean EV. This was not just a minor oversight but a glaring indication of the company’s inadequate internal controls and accounting practices, which had allowed such a significant amount of money to essentially vanish without a trace.
The mismanagement of customer payments led to a scenario where vehicles were being handed over without the corresponding financial transactions being properly accounted for.
The internal chaos at Fisker became so severe that it affected the company’s ability to maintain focus on its sales efforts, critically at a time when the automotive startup was navigating through a tumultuous phase, aiming to restructure its business model to stave off financial ruin.
In an attempt to rectify the situation, Fisker and its external auditor, PricewaterhouseCoopers (PwC), attempted to reconcile the missing payments, a task that proved to be daunting due to the sheer disorganization of the company’s financial documentation and record-keeping practices. The audit process revealed a litany of procedural deficiencies, from the mishandling of cheques and credit card receipts to the lack of a consistent method for tracking and documenting sales transactions.
Fisker did disclose these financial issues in a regulatory filing last year, but did not go into the detail, only saying it had identified “material weaknesses” in its internal control over financial reporting. This filing was issued soon after the sudden departure of Fisker’s chief accounting officer in October, leading to a delay in the filing of its quarterly 10-Q report.
