Welcome back to Cautious Optimism! It’s June 18th, 2024. Today’s we’re looking at an upcoming IPO, why Fisker failed, and Adobe’s trouble with the FTC regarding its cancellation practices! — Alex
Trending Up: Loser shit … Coinbase’s ability to get into crypto deals … Gemini’s global availability … balance in the domestic labor market … autonomous trucking … consumer solar … LLM price transparency … African data center density … trade spats …
Trending Down: Chinese submarine reliability … rule of law … OpenAI’s savvy? … Apple’s business climate in Europe … China’s consumers … India’s infrastructure during heat waves … people attending American higher education institutions … oil demand growth …
IPO Watch: Webtoon will target an IPO price range of $18 and $21. Selling 15 million shares, the company could see gross proceeds as great as $315 million. At the middle of its target range, Webtoon is worth $2.6 billion on a fully diluted basis. The company is slated to list on June 27th. More soon.
Karma: A new proposed law in the United States would “require social media platform operators to develop a process for removing [“deepfake AI pornographic images”] within 48 hours of receiving a valid request from a victim,” and “sites would also have to make a reasonable effort to remove any other copies of the images, including ones shared in private groups,” CNBC reports. The publication got early access to the bill’s contents. Tech companies have pushed ahead, offering powerful AI tools to every person. If the bill passes, they’ll have to help with the cleanup that that rollout has engendered. Seems fair.
Fisker Flops
Today in news that was far from shocking, troubled EV company Fisker threw in the towel on normal operations. Here’s my friend Kirsten Korosec on the situation:
Fisker Inc., the EV startup founded by famed designer Henrik Fisker, filed for Chapter 11 bankruptcy protection — a capstone to months of problems with its Ocean SUV that included recalls and dozens of lemon law lawsuits.
Why bankruptcy? A mismatch between its assets ($100 million to $500 million, per its filing) and its debts ($500 million to $1 billion). But how it got to this point is more interesting. Let’s dig a little.
It’s hard to build a car company from the ground up
Building a car company is extremely difficult and expensive. Rivian’s accumulated deficit, for example, grew from $18.6 billion at the conclusion of 2023 to $20.0 billion by the end of the first quarter. And that’s at an EV company that has reached material scale, growing its revenues from $661 million in Q1 2023 to $1.2 billion in the first quarter of this year.
If Rivian is still piling up accumulated deficits at a rate of more than $1 billion per quarter, how bad are the economics at an even smaller EV company? Terrible, it turns out.
Fisker has not released its first quarter earnings due to internal controls issues and the loss of PwC as its auditor. But what we can see through the end of 2023 is troubling enough:
Q1 2023: Fisker delivers its first Ocean EVs in two European countries. Revenues were $198,000, its net loss $120.6 million, and the company ended with cash and equivalents of $652.5 million. Fisker forecasted 1,400 to 1,700 EVs built in the second quarter, and 32,000 to 36,000 produced in the year.
Operating cash burn: $83.7 million
Q2 2023: Fisker begins to deliver in more countries and counts up its first “automotive sales revenues.” Revenues were $825,000, and the company posted a net loss of $85.5 million. Thanks to a $300 million bond sale, Fisker closed the quarter with “cash, cash equivalents, and restricted cash” of $822 million.
Operating cash burn: $128.1 million
Q3 2023: First quarter with >1,000 EV deliveries. Revenues were $71.8 million, earnings the company a net loss of $91.0 million. The company issued $170 million ($150 million net) worth of senior unsecured convertible notes. Cash, cash equivalents, and restricted cash came to $625.4 million.
Operating cash burn: $308.2 million