Since the release of the Fisker Karma hybrid automobile last fall, Quantum Fuel Systems Technologies Worldwide, Inc. (QTWW) has taken a somewhat surprising beating in terms of share price.
The car has been in the works since at least 2007, when designer and founder of Fisker Automotive Henrik Fisker of Denmark presented the concept at a Detroit auto show. With celebrity endorsements from Leonardo DiCaprio and a guaranteed loan from the government, this car has been widely acclaimed as the future of green transportation technology.
Unfortunately, since the vehicle’s actual delivery towards the end of December, reviews have been far from glowing.
The exterior of the $100,000 car is clearly designed to appeal to those with a taste for luxury, but the Fisker Karma’s fuel efficiency is nothing out of the ordinary, and it runs about thirty to forty miles on a full battery before the gas-fueled engine kicks in.
The problem, according to some sources, is its weight. It’s no wonder this car has little flair when you consider that it carries batteries, two electric motors, and a roof-mounted solar panel, in addition to all the regular elements of a car.
Fisker has never made a profit and relied on the DOE for financing for this project, as well as the next one, which will be a less expensive sedan known as the Nina. Recalls and other glitches with the Fisker Karma have forced this company to scale down its sales projections on both vehicles.
For Quantum, this venture has hurt both its credibility and the price of its shares, in my opinion. The Fisker Karma uses Quantum’s Q-Drive powertrain, and the Quantum website claims that the whole concept for the car was designed as a joint project between the two companies.
It seems to me that the spike in share price experienced last year were caused by fluff, by which I mean publicity and hype about the Fisker Karma. The promise was better than the actual thing, so people got excited about investing in Quantum.
The weeks immediately prior to and following the release saw a drop in stock value, and it has yet to recover. That being said, current share price appears to be stabilizing at a normal level for this company since its inception. When it comes to investing, there is definitely something to be said sometimes for stability.
I would not recommend this stock for those who want to get rich, though. I believe it could provide a steady source of supplementary income, but I definitely would want to invest in other areas to balance out the losses Quantum shareholders take from time to time.
Looking forward, it is difficult to predict what the next quarter will hold. With its fate at least partially linked to Fisker Automotive, Quantum may have backed itself into a corner.
Investments in Fisker Automotive totaled over $850 million, in addition to the federal loan of $529 million. The company is currently turning out about twenty-five cars a day, but in order to attract more investment and to pay back its loan, it will have to rake in some serious revenue.
One smart move that Fisker made was to bring in former CEO, President, and Vice Chairman of Chrysler Group Tom LaSorda as Vice Chairman of the Fisker Board. LaSorda spent twenty-three years at General Motors and was one of the main players in Chrysler’s sale to Fiat Group.
His expertise might be just what this flailing company needs to build up some steam again. Hopefully in doing so, Fisker Automotive will carry Quantum with it.
However, problems for Fisker have not only been in relation to the car itself. Investors based out of Florida paid $4.5 million to equity firm CEO John Mattera, who claimed to be selling them preferred shares in Fisker’s company.
They never received shares of any kind, and the matter has gone to court. While Fisker has nothing to do with the scam, this sort of negative publicity has to hurt the company name.
So where does all this leave Quantum? After its brief flirtation with the stock market big boys, it seems to be drifting back into oblivion. With shares selling at less than a dollar at the time of writing, the company’s future looks bleak, at least to me.
But all this negative talk is not a suggestion on my part that investors should run out and sell off their shares. In fact, holding these shares seems like the best option for now. If LaSorda manages to pull Fisker out of its rut, then Quantum is sure to go with it.
Also, while the Fisker Karma seems to be Quantum’s most prominent project of late, it is not the only source of revenue for the company. Quantum’s market value stands at $24.2 million, and current EPS is a very unattractive $ -1.55.
Since 2004, this company has had a gradual but mostly constant downward trend, and the past year has been the most brutal of all. In 2009, shares sold at around $75, which was already way down from the nearly $225 of five years earlier.
In spite of the tiny upswing since the fall, Quantum will have to come up with a strong new growth plan if it wants to remain competitive on the market.
And it may have just done so: Yahoo Finance acknowledges the company as “a global leader in natural gas, hydrogen and hybrid electric vehicle technologies,” which shows that its writers have not lost faith in the company. Furthermore, Quantum announced just last week that it will be putting out a series of natural gas storage tanks with a multi-purpose appeal that extends beyond their increased capacity.
Maybe there is a light at the end of the tunnel for Quantum after all. Current shareholders should wait and see, in my opinion. For those looking to buy in, I would say this is a risky venture, but it just might pay off if you hold long enough and then sell at the right time.