Faraday Future Intelligent Electric (NASDAQ:FFIE) may have dodged a bullet. The electric vehicle maker has been under the gun of seeing its shares delisted from the Nasdaq exchange.
First, Faraday Future stock faced delisting because it failed to file its annual report in a timely manner and its stock was trading under $1 per share for 30 consecutive days. Then it was notified because FFIE stock had traded under 10 cents per share for 10 straight days it faced delisting, too.
The EV maker got lucky because the meme stock trading frenzy kicked in just in time and bumped up Faraday Future stock to well over $3 a share (for one day at least).
The stock stayed above a dollar for a week, which may have delayed any delisting inquiry especially since Faraday Future won a stay of the action while it appealed.
Of course, FFIE predictably tumbled again and is now down to 50 cents but that at least is above the 10-cent threshold.
The problem for Faraday Future stock investors is there is still plenty of incoming fire aimed at it and it probably won’t be so lucky in the future.
Not a Good Business
The EV maker just started making deliveries of its second generation FF91 vehicles after a four-month hiatus. It stopped delivering its high-end luxury EVs in November because of having “substantial doubt” about its ability to continue as a going concern. That situation hasn’t improved over the ensuing months.
As my colleague Samuel O’Brient also noted, “deliveries” is a misnomer. It was a single vehicle to one high-profile buyer. It is not as if Faraday Future fired up the assembly line and started pumping out vehicles again. There remains substantial doubt about the automaker being a viable business.
The company routinely warns that unless it can raise more cash it won’t survive. It’s a good bet it won’t.
Bankruptcy in the Cards
In its delayed fourth quarter and full-year report Faraday Future revealed it ended the year with less than $2 million in cash. It also had $2.1 million in restricted cash but that is money held in reserve for specific purposes and can’t be accessed for ordinary business use.
What that means for investors is Faraday Future will eventually get delisted. There is no reason for its stock to be as high as it is let alone go any higher. While it could move to the pink sheets and trade over-the-counter as a penny stock, more than likely it will file for bankruptcy.
There are several types of bankruptcy the EV maker could use. One allows a company to discharge its debts and reorganize to emerge as a leaner, more financial stable company. I don’t see Faraday Future using that.
It doesn’t have much debt to speak of to shed. Rather, I see the luxury carmaker going the liquidation route where it just sells off its assets and tries to get as much money as it can.
Taking Heavy Fire
The electric vehicle market just doesn’t favor Faraday Future. With sales of affordable EVs slowing, there is little demand for the sort of high-end luxury EVs Faraday produces (when it does produce a car).
Lucid Group (NASDAQ:LCID) is running into the same problem. It makes luxury EVs that seem cheap in comparison to the FF91 but even it can’t find a market for them. Mercedes-Benz (OTCMKTS:MBGYY) also found it difficult to move any EVs and will focus on hybrids more for the immediate future.
And that’s the problem with focusing on too niche of a market. Tesla (NASDAQ:TSLA) sought to make its cars available to the masses and became successful. When you carve up the industry into smaller, more expensive segments you limit your ability to sell enough cars to make it worthwhile.
Faraday Future Intelligent Electric sought out the cream of the EV buying public and shot itself in the foot. By definition it cut itself off from 99% of all potential customers. Now with its financial woes, even the uber rich won’t buy its EVs.
There is no future in Faraday Future stock and investors should stay far away.
On the date of publication, Rich Duprey 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.
