The electric vehicle (EV) industry is abuzz today following a major partnership between Rivian (NASDAQ:RIVN) and Volkswagen (OTCMKTS:VWAGY). Volkswagen will invest up to $5 billion into Rivian over the next few years, starting with a $1 billion investment in exchange for a convertible promissory note.
While the deal doesn’t carry any impact toward Faraday Future (NASDAQ:FFIE), the company — and other EV companies like Lucid (NASDAQ:LCID) — are rallying higher on the news.
A short squeeze could possibly be behind the rise in FFIE stock, although short interest as as percentage of float is only 6.39%, equivalent to 27.8 million shares, according to Fintel. A short interest of 10% or greater is generally considered high.
Faraday’s status as a meme stock could also be driving the incline. Between May 9 and May 20, FFIE rose by more than 4,000% to $1.80 as retail investors converged on the stock. FFIE stock trades in the high 40 cents range today.
FFIE Stock Catches a Bid Following Rivian-Volkswagen Deal
On Monday, Faraday unveiled its plan to regain compliance with Nasdaq’s $1 minimum bid price requirement. This involves a proposal at the company’s upcoming annual meeting of stockholders. The meeting will be held in July, although Faraday hasn’t decided on a specific date yet.
The proposal is a reverse stock split in a ratio between 1-for-2 and 1-for-40. The ratio will likely be much higher than 1-for-2, as Faraday stated that it would seek a stock price of at least $5 following a reverse split.
FFIE stock must close at $1 or higher for at least 10 consecutive business days in order to regain compliance with Nasdaq’s minimum bid requirement. Faraday has sent a request to Nasdaq to extend its deadline to achieve this measure to Aug. 30.
Faraday also has a proposal to increase its authorized shares. The company noted that it has sought “equity-based or equity-linked strategic financing” in the Middle East and other places. However, it doesn’t have enough authorized shares to receive this financing. The proposal seeks to increase authorized common stock to 4.16 billion shares from 463.31 million shares, marking a significant increase of 800%. That isn’t a good signal for shareholders, as more shares outstanding as a result of an increase in authorized shares means dilution.
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On the date of publication, Eddie Pan 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.
