Faraday Future (NASDAQ:FFIE) represents an ambitious EV startup known for its risk and volatility. Faraday Future stock certainly has disappointed, with the stock down over 99% from its peak amid significant dilution and operational underperformance. That said, FFIE stock is also one that has recently been moving higher.
FFIE rose Monday ahead of its July 31 shareholder meeting, where investors will vote on key proposals. The agenda includes electing directors, ratifying the accounting firm, approving share issuance, a reverse stock split, adding shares to the 2021 Stock Incentive Plan, and scheduling additional meetings.
The Bull Case
Faraday Future has struggled with timely SEC filings and maintaining Nasdaq’s $1 minimum bid price. While not intentional, these issues concern investors who fear delisting. Nasdaq granted Faraday Future conditional approval for continued listing, requiring compliance with periodic reporting by July 31 and the bid price requirement by Aug. 31, 2024.
The company plans to file its Q1 and Q2 2024 Form 10-Qs soon and may execute a reverse stock split to meet bid-price requirements.
Opinions on Faraday Future vary, with some bearish because of withdrawn production outlooks and others noting its potential as a volatile meme stock.
However, investors should focus on its “dual-home-market strategy,” particularly the company’s upcoming “US-China Automotive Industry Bridge Strategy.”
The Bear Case
In mid-June, Faraday Future delivered another FF 91, priced at $309,000. Chief Product Officer YT Jia mentioned plans for a more affordable brand under their “US-China Automotive Industry Bridge Strategy.”
Despite delivering only 10 FF 91s since August 2023, generating $3.9 million in revenue, the company also burned through $278 million in cash flow last year. That’s an improvement from a loss of $383 million in 2022, but it also represents an unsustainable business model.
Despite a July 8 spike, FFIE stock remains risky, down 34% this year at 40 cents per share. Violating Nasdaq’s $1 minimum bid, FFIE plans a reverse stock split to avoid delisting. Recently, Nasdaq granted conditional listing approval.
CEO Matthias Aydt expressed gratitude, emphasizing commitment to regaining full compliance.
Nasdaq approved Faraday Future’s continued listing, provided the company files its Q1 Form 10-Q by July 31 and achieves a $1 minimum share price for 10 consecutive days by August 31.
The Verdict on Faraday Future Stock
The reality is that Faraday Future may be a stock with some short-term volatility traders may want to gain exposure to. But in my view, this penny stock is one that carries exceptionally high risk.
Any investor looking to add exposure to a company taking on a reverse split is inherently betting on a given company to dig its way out of a hole. That may be a tall ask for this specific EV maker.
I have no idea if the company’s core technology and infrastructure will warrant an acquisition by a larger player. But for now, I think the best move may be to watch this one from the safety of the sidelines right now.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.