John Ransom

If you’ve come in late to the movie the Life and Death of Fisker Automotive, you might get the impression that the only thing that stood between success and failure for the electric car company was their inability to meet a few milestones that the government imposed.

In reality, the biggest problem Fisker faced in their quest for success wasn’t the milestones the government gave them, but rather the money the government gave them.

“The electric carmaker,” reports CNN, “which laid off 75% of its employees earlier this month, missed its first loan payment to the Energy Department on Monday. Treasury has already seized $21 million in an effort to get back some of the taxpayer money loaned to it, but most of the $192 million that was given to the company over the three years is very much at risk.”

Fisker is what is known as a story stock. It’s not a public company, of course, but it still qualifies. A story stock is a company that relies upon “a story” to get new investors to pony up more money to keep the story going. 

It can’t point to results, or a business model, or demographics. It has some new, breakthrough technology or process that will revolutionize the world if and when… blah, blah, blah, blah, talk, talk, talk.

And all they need is a bit more money.  

Facebook was not- is not- a story stock. They have many users and will someday figure out how to monetize them, just as Google figured out how to monetize their users. Google wasn’t a story stock either.

Story stocks suffer from the opposite problem Google and Facebook posed: Story stocks have a revolutionary way to monetize demand for products, but they have little demand.

And the last thing a company with very little demand needs is a bit more money.

A bit more money gives a company with no customers the trappings of success without the fuss and bother of actually selling things; a bit more money allows the story to supplant sales; a bit more money means that the only thing left to do is go out and get a bit more money over and over again.

In the 1990s the fuel of the future was to be ethanol, especially ethanol derived from biomass cellulose waste like switchgrass and cornstalks and sawdust.

All they needed was a bit more money to perfect the technology of refining ethanol from waste products and success was to be ensured.


John Ransom

John Ransom is the Finance Editor for Townhall Finance.
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