Faraday Future (NASDAQ:FFIE) stock rose as much as 30% today after announcing $135 million in financing commitments. FFIE stock has since significantly pared back those gains to a more modest 5%.
The Los Angeles-based electric vehicle (EV) start-up that was founded in 2014 has struggled over the past year, with its share price declining 70% to trade at $1.20 a share. News that the company has received $135 million in funding is being cheered by investors. FFIE stock had plunged 92% since its market debut in July 2021 as the unprofitable start-up endured a board battle and struggled with dwindling cash that hurt its production schedule.
What Happened
Faraday Future said it plans to use the funds raised to begin production of its electric luxury vehicle called the “FF 91 Futurist” beginning in March of this year. Delivery of another vehicle, an electric sport utility vehicle (SUV), had been scheduled to start late last year but was delayed due to a lack of funds. Production on the electric SUV is now slated to begin before the end of April this year.
Faraday Future also announced plans to hold an investor meeting on Feb. 28 to vote on a proposal for increasing its outstanding stock, which it said will allow for additional financing to help drive its EV production. Investors appear excited by the news that the company is about to begin production on several key electric vehicles.
Why It Matters
Prior to today, Faraday Future was forced to conserve cash by slowing the development of its electric vehicles. The company reported that it had $22.5 million of cash on hand on Nov. 30 last year, down from $31.76 million at the end of 2021’s third quarter. Also last November, Faraday Future named its China head Xuefeng Chen as its new chief executive officer (CEO).
The company’s previous CEO Carsten Breitfeld was asked to resign following a review of the company’s performance after it went public in 2021 and amid concerns about the cratering stock price. FFIE shares are currently trading deep in penny stock territory. Today’s rally in the share price provides some much-needed relief to shareholders who have stuck with the company.
What’s Next for FFIE Stock
FFIE stock gets a strong bounce today on news that the company has secured $135 million in new financing. That the money will enable Faraday Future to begin production on its electric vehicles also has investors excited. That said, this is a start-up company whose stock trades under $2 a share and has fallen considerably over the past year. Investors should be careful.
On the date of publication, Joel Baglole did not have (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.
