After skyrocketing to truly astounding heights during last week’s meme stock rally, Faraday Future Intelligent Electric (NASDAQ:FFIE) stock seems to be running out of momentum.
The electric vehicle (EV) producer went from a little-known penny stock that many investors ignored to being the talk of Wall Street. Over the past month, FFIE has surged more than 2,000%, beating the meme stock slump that quickly overtook some of its larger and more popular peers. But now shares are falling again, and data reveals that the short sellers appear to be closing in. Clearly the sentiment for FFIE stock is that its growth isn’t likely to continue.
What’s Happening With FFIE Stock
FFIE stock is still in the green for the week. Yet it’s difficult to ignore the fact that shares have been trending downward all day despite a failed attempt at a rally. As of this writing, they are down 24% for the day, hovering at just over $1 per share. While that’s a substantial improvement over the roughly 5 cents it traded at on May 1, its decline is still concerning.
Now, data from Fintel suggests that short interest in FFIE stock is surging. More than 95% of the stock’s float is being sold short, and the sellers have just 0.07 days to cover their positions. The cost to borrow FFIE shares is also rising. As of this writing, it is at an annual percentage rate of 13.42%, up from yesterday’s cost of 10.95%. That certainly makes sense, given how high short interest in FFIE stock is. As The Street reports:
“Borrow fee rates are determined by the market’s supply-and-demand conditions. If a stock is in hot demand from short sellers (in other words, it has high short interest), the borrow fees will be proportionately high, based on the supply of available shares.”
A Prime Short Squeeze Target
With that in mind, it comes as no surprise that Faraday boasts a short squeeze score from Fintel of 97.01, making it one of the top stocks on Fintel’s short squeeze leaderboard. It ranks only behind fashion retailer Rent the Runway (NASDAQ:RENT), which boasts a short squeeze score of 97.69.
The fact that short sellers are clearly eyeing FFIE stock and staking their bets suggests that another short squeeze could be brewing. Investors should keep a careful eye on Faraday Future to assess if another one will play out.
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On the date of publication, Samuel O’Brient 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.
