Faraday Future (NASDAQ:FFIE) stock is plunging lower after the electric vehicle (EV) company proposed a reverse stock split of between 1-for-2 to 1-for-40 in order to regain compliance with Nasdaq’s minimum bid requirement. Faraday added that it would not pursue a reverse split if its shares could regain compliance naturally.
“The final ratio will be determined by the Board after stockholder approval, with the option to abandon, delay or postpone the reverse stock split,” said Faraday.
In order to regain compliance, FFIE stock must close at or above $1 for at least 10 consecutive trading days, but generally no more than 20 consecutive trading days.
Back in December, FFIE closed below $1 for 30 consecutive trading days, resulting in a Nasdaq deficiency notice. Faraday was also late in filing its 2023 annual report, while its shares also closed below 10 cents for 10 consecutive trading days. These two deficiencies serve as an additional basis for Nasdaq to delist shares. Faraday has since filed its annual report and plans to file its first-quarter Form 10-Q by July and its Q2 Form 10-Q on time.
FFIE Stock: Faraday Proposes Reverse Split of Up to 1-for-40
Faraday has requested a deadline of Aug. 30 to regain compliance with the minimum bid requirement. It wants shares to trade for at least $5 following a potential reverse split.
Nasdaq provided Faraday with an opportunity to request a hearing in front of the Nasdaq Hearings Panel to share its plan to regain compliance, which it did. FFIE will remain listed on the exchange while the company awaits a response.
Meanwhile, Faraday also wants to increase its authorized shares, which would have dilutive effects if additional shares are issued. The company added that its efforts to receive financing from the Middle East were constrained by the amount of its authorized shares. It didn’t specify the specific amount of the proposed increase.
More authorized shares would allow the company to “better pursue equity and equity-linked strategic financing.”
Both a reverse stock split and an increase in authorized shares will be voted upon at Faraday’s upcoming annual meeting of stockholders scheduled for July.
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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.
