Fisker (FSR), an electric vehicle designer that came public via a SPAC in July 2020, is increasingly awarding directors stock as its shares fall. After peaking above $28 per share in March 2021, Fisker’s shares have fallen approximately 57%. In its latest 10-Q, Fisker reveals a series of insider deals with the potential to dilute existing shareholders:

-Roderick Randall, a director, converted his preferred shares and a bridge note into 3.4 million shares of common stock

While the bridge note was disclosed in Fisker’s 10-K, the preferred share conversion was not disclosed as a related party transaction. Nor was the consulting agreement Fisker has had with Randall since March 2017, though it was mentioned in Fisker’s proxy. Though Randall earned $108,000 in total compensation as a director in 2020, the latest 10-Q reveals the additional compensation Randall receives as a consultant:

“In connection with the consulting agreement, he received an option grant to purchase 159,769 shares (post business combination) of our Class A common stock. Also, Mr. Randall received option grants to purchase 67,905 and 13,581 shares (post business combination) of our Class A common stock on June 22, 2020.”

Separately, Nadine Watt, a director, converted her preferred shares into 366,690 shares of common stock. Subsequently, she was granted a stock option award as was her husband, Andrew Jameson, whom Fisker hired as a consultant:

“Mrs. Watt received an option grant to purchase 13,581 shares (post business combination) of our Class A common stock on June 22, 2020 and Mr. Jameson received an option grant to purchase 14,939 shares (post business combination) of our Class A common stock on September 21, 2020 in exchange for providing consulting services.”

Three week’s before the end of the quarter Fisker appointed Mitchell Zuklie to its board of directors and granted him 2,711 RSUs. Zuklie happens to be Chairman of Orrick, Herrington & Sutcliff LLP, a law firm that provides Fisker various legal services. Fisker has paid Zuklie’s firm a half million dollars in the last two years:

“During the three-months ended March 31, 2021 and 2020, we incurred expenses for legal services rendered by Orrick totaling approximately $0.3 million and $0.2 million, respectively.”

As of March 31, 2021, Zuklie holds 54,461 Fisker shares meaning he has an ownership interest, compensation arrangement, and oversight role that some legal professionals may argue is a conflict of interest.

In all, the latest quarterly report reveals more than 4 million common shares have been added to Fisker’s share count via preferred conversions, options grants, or RSUs for:

-Board members who double as consultants
-Spouses of board members hired as consultants
-Outside counsel appointed to board

Based on the amended 10-K Fisker was required to file to correct errors in the way the company originally accounted for SPAC warrants, the awards and conversions detailed in the latest quarterly report dilute existing shareholders by adding approximately 1.3% to Fisker’s share count.