Shares of premium electric vehicle (EV) manufacturer Faraday Future (NASDAQ:FFIE) are suffering a severe drop on Wednesday. Management warned that the company may file for bankruptcy if it’s unable to secure additional capital. Unfortunately, the pricing of Faraday’s EVs has translated to a very limited market, as evidenced by the firm’s disappointing sales. Therefore, FFIE stock will likely incur a delisting, barring some lifeline.
In a Form 10-K document filed with the U.S. Securities and Exchange Commission (SEC), Faraday issued a going concern risk. Specifically, management warned that the company “does not have sufficient liquidity to pay its outstanding obligations and to operate its business.” Unfortunately, the company said that it will likely seek bankruptcy protection unless it can secure new funding.
While this is an alarming disclosure, it also isn’t much of a surprise. Faraday Future only recently disclosed its rather grim financial performance for the full year of 2023. Last year, the EV manufacturer only sold four vehicles and leased six. Automotive sales revenue for the 12 months ended Dec. 31, 2023 came out to only $784,000.
Adding to the woes, research and development expenses reached $132 million in 2023. While that is a marked decline from nearly $300 million in 2022, Faraday is nowhere near where it needs to be.
FFIE Stock Faces Delisting Amid Compounding Troubles
While the financial print is ugly, what’s even worse is that Faraday is late on its required disclosure for the period ended March 31, 2024. As a result, stakeholders of FFIE stock are rushing for the exits.
On Tuesday, management revealed that it received an anticipated letter from the Nasdaq indicating that the EV maker failed to timely file its Form 10-Q for the first quarter. This matter “could serve as an additional basis for the delisting” of FFIE stock. Previously, the stock also attracted attention for dropping below the exchange’s $1 minimum bid price.
In fairness, Faraday has requested a hearing before the Nasdaq Hearings Panel. Should the hearing be granted, management intends to present its proposal for filing the Form 10-Q and its plans to remedy its listing standard deficiency.
Despite the efforts, though, the writing was likely on the wall for FFIE stock from the very beginning. With a price tag of more than $300,000 for Faraday EVs, the market for buyers was always going to be limited. That’s no longer speculation but a harsh reality, given the diminutive sales figure.
Perplexingly, management acknowledged in its Form 10-K that pricing represented a primary competitive factor in the EV market. By going well above the norm, Faraday became dependent on an extremely niche consumer segment.
On the date of publication, Josh Enomoto 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.
