This week isn’t off to a good start for Faraday Future Intelligent Electric (NASDAQ:FFIE) stock. The electric vehicle (EV) producer announced a 1-for-80 reverse stock split last Friday, Aug. 25, which became effective today. This news initially sent shares surging. But since then, FFIE has reversed direction completely.
For the past six months, FFIE stock had remained relatively stagnant. Now after the reverse split, shares are trading at a much higher price point but quickly losing ground. This suggests that the company’s problems may run deeper than previously expected — and that they may require stronger action than a reverse stock split.
Does this mean that Faraday Future should be counted as one of the EV stocks to sell? Let’s take a closer look.
What’s Happening With FFIE Stock?
The past year has brought an onslaught of bad headlines for Faraday Future. The company operates in a growing market, but it hasn’t been able to hold its own against bigger, more stable EV makers. While the firm recently delivered its first FF 91 2.0 Futurist Alliance, FFIE stock has been pushed down by production delays. Additionally, the firm also announced some accounting errors earlier this summer.
The decision to enact a reverse stock split first came to light in June 2023 ahead of a shareholder vote. Interim Chief Financial Officer and Chief Accounting Officer Yun Han touted the move as a necessary step forward. Han issued the following statement on the proposal:
“First, a reverse stock split will quickly change the low stock price status, paving the way for the introduction of large institutional investors […] In order to quickly break the financial bottleneck and promote the successful implementation of FF’s Ultimate AI TechLuxury strategy, the Company believes new issuances of common stock and warrants are a prerequisite for attracting institutional investors and unleashing FF’s ‘Five Success-Defining
Powers.’”
That sounds like a promising growth strategy for a company that has spent months failing to garner any momentum. Still, FFIE stock is down about 25% for the day and its current trajectory suggests that shares will fall even further. The market has likely interpreted the decision as a sign of distress from the company, a common explanation for reverse splits. Faraday may not be a penny stock anymore, but that doesn’t mean investors have confidence in its potential for future growth.
On the date of publication, Samuel O’Brient 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.
