Faraday Future Stock: A 50-Cent Gamble on EV Revolution or Delisting Disaster?

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  • Faraday Future Intelligent Electric (FFIE) isn’t something buy-and-hold investors would consider.
  • At under 50 cents, Faraday Future stock is nothing but a cheap lottery ticket.
  • A second brand seems a bit presumptuous for a company that sold four EVs and leased six others in 2023.
Faraday Future Stock - Faraday Future Stock: A 50-Cent Gamble on EV Revolution or Delisting Disaster?

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While there are plenty of electric vehicle stocks to choose from, it’s hard to understand why anybody would consider Faraday Future Intelligent Electric (NASDAQ:FFIE) given Faraday Future stock trades around 50 cents and it’s late filing its Q1 2024 10-Q. 

If I’ve written about the Los Angeles-based company, it was several years ago. Clearly, I needn’t have paid attention to this struggling EV company, despite recently jumping 100% on hopes that it would get a lifeline like Rivian (NASDAQ:RIVN) did with Volkswagen (OTCMKTS:VWAGY).

As my InvestorPlace colleague David Moadel recently stated, “Stick a Fork in It! Faraday Future Stock Is Done.”

In this past Friday’s trading, 186.6 million shares of FFIE stock traded hands, so somebody’s buying the company’s stock. The question is who? 

It likely wouldn’t be large pension plans, as they are often restricted from buying stocks under a certain share price or market capitalization. Hedge funds are a possibility, but even there, the best ones aren’t going to touch Faraday. That leaves retail investors. 

Here are three reasons they might be buying.

Faraday Future Stock Is a Lottery Ticket

I’m sure there is a segment of the retail investor community that’s buying FFIE stock because it’s cheaper than a lottery ticket. A thousand shares of Faraday costs $400. To buy 1,000 shares of Tesla (NASDAQ:TSLA) costs you $252,000. There’s a big difference in commitment. 

Less than a year ago in August 2023, Faraday Future stock traded at $83.64. In January 2021, in the middle of the meme-stock craze, its shares were 50 times that amount. Buying one thousand shares would have cost you more than $4 million. 

Were it to get back to those levels, it would be a lifechanger for those investors, at the low, low entry price of 40 cents. That’s hard to resist. The lure of a big payday is why sports betting has become so popular. The cost to play is low so bettors treat it like entertainment rather than gambling.

If Faraday gets delisted, they move on to the next 40-cent lottery ticket. 

Talk of a Second Brand

While we’re talking “pie in the sky” thinking, the company delivered another of its $309,000 FF 91’s in mid-June.

“FF is considering introducing a second brand under our ‘US-China Automotive Industry Bridge Strategy’, which could seek to integrate our high-value solutions and features into vehicles in a more affordable mass market product segment, which would enable more retail investors to enjoy our ‘Ultimate AI TechLuxury’ in the future,” stated Chief Product and User Ecosystem Officer YT Jia in the June 13 news release.

Considering it only delivered its first production FF 91 2.0 in August 2023, with three more sold and delivered in 2023, plus six leased, for 10 in total. Even at the lofty retail price, that’s only $3.9 million in revenue.  

Further, with so little in revenue, it burned through $278 million in cash flow last year. On the bright side, its cash flow in 2022 was -$383 million, so it did a better job in 2023 controlling costs. 

At the end of the day, its plan to enter the Middle East marketplace with its strategic partners, Master Investment and Siraj Holding LLC, makes far more sense than adding a second brand. 

Avoiding Delisting and Q1 2024 Filing

There would likely be a boost to the stock’s share price were it to get both its Q1 2024 results filed with the SEC by the July 31 deadline and meet the minimum bid price requirement above $1 for 10 consecutive trading days by August 31.  

On June 24, it proposed up to a 40:1 reverse stock split to get the share price above $1. At the same time it proposed raising the amount of authorized shares so that it could seek greater amounts of equity financing. 

At its present share price, it would have to do at least a 1-for-3 reverse stock split to get there. More than likely, it will want to get out of penny-stock status ($5 or lower), which means a reverse stock split of at least 15-for-1. 

The same day as the proposed reverse stock split, the company appointed Macias Gini & O’Connell LLP as its new independent auditor. The California-based accounting firm was appointed to replace Mazars USA, which resigned as auditor in April. 

If it gets its financial filings in order, there’s a real possibility its share price will jump above $1 as a result, but a reverse stock split is still needed to avoid another delisting issue in the future. 

It’s a speculative buy for only the most aggressive investor. Everyone else should stay away.   

On the date of publication, Will Ashworth 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.

On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


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