Faraday Future (NASDAQ:FFIE), a struggling electric vehicle (EV) maker, has joined the meme stock parade.
It doesn’t have the money to make cars, but with 95% of the stock being held short, it’s a perfect candidate for a short squeeze. That’s what meme stock trades are all about.
Small traders sent shares up 367% on May 14 to squeeze out Faraday shorts. The stock doubled again overnight. Just don’t get too excited about the underlying business. At its opening price this morning of 54 cents, it’s still worth under $24 million.
Pennies From Shorting
I have written about Faraday several times. It came public through a Special Purpose Acquisition Company (SPAC) in 2021 and lost 98% of its value by December 2022.
Faraday wasted years changing management from American to Chinese. By the time it began making its FF91 in China, luxury EVs were out of style. Management complained of “market manipulation” as shares continued their race into penny stock territory last year.
Buying this stock may be nuts, but that’s not the point, my friend.
The point is that some investors decided to get in on Faraday’s collapse and sold short. After Keith Gill, alias “Roaring Kitty,” said the short squeeze game was back on, small traders began looking for squeeze candidates. FFIE fit the bill perfectly.
As fellow InvestorPlace contributor Chris MacDonald writes, FFIE was a “runaway train” on May 14. All the things that make it a horrible investment, like its fight to avoid eviction from its headquarters, were suddenly opportunities.
The excitement continued overnight, as our William White writes. Sentiment is extremely bullish at Stocktwits, with many expecting a move to $1 or even $2 per share.
FFIE Stock: What Happens Next?
At some point, the music stops. Shorts take their medicine and exit their losing positions. That’s when you want to exit this trade because Faraday, as a company, has no future.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Dana Blankenhorn 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.
