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Thursday, Nov 30, 2023

Carmaker Faraday Future Sess Shares Tumble 95%

Faraday Future Intelligent Electric Inc. has seen its stock price run out of gas the past couple of months.

Since Aug. 25 when the stock closed at $12.48, the Gardena electric car manufacturer has lost more than 95% of its value. Shares closed at 52 cents on Nov. 16.

That August date preceded a 1-to-80 reverse stock split done by Faraday.

Jonathan Maroko, the interim chief financial officer of the company, said during a Nov. 13 conference call with analysts to discuss third quarter financials, that from an operational perspective, Faraday is the most mature it has been in its history.

“We are delivering (FF91) vehicles, generating revenue, and slowly but surely increasing our production,” Maroko said.

The company has a new senior management team that is “passionate and capable” and committed to making Faraday a success, he said.

Most importantly, he added, Faraday is in talks with strategic investors and partners to bring in meaningful and potentially transformative capital.

But he conceded that the company’s stock price has fallen dramatically.

“We are taking steps to attempt to halt and reverse that decline,” Maroko said.

The company has noticed a large failure to deliver data in recent months, which could be indicative of illegal naked short selling, he continued.

Naked short-selling refers to the practice of selling shares that an investor doesn’t own and hasn’t borrowed.

“We’ve engaged shareholder intelligence services to give us actionable intelligence on potential market manipulation and illegal short selling,” Maroko said. “We will provide an update on this before year end.

“Reaffirming our strategic vision, we remain resolute in our mission to grow Faraday Future towards cash generation and profitability, aiming for breakeven operating cash flow as early as 2025,” he added.

Q3 earnings

Faraday narrowed its net loss in the third quarter and saw revenue for the first time.

The company reported on Nov. 13 a net loss of $78 million ($3.78 a share) in the quarter ending Sept. 30, compared with a net loss of $120 million ($27.67) in the same period a year earlier. Revenue was $551,000. The release of the earnings sent the stock down by a nickel, or 5.6%, from the close on Nov. 13 of 88 cents to the close the following day. The stock continued to drop after that to a close of 68 cents on Nov. 15, or a decrease of about 18%.

There was no clear explanation as to why the stock price has dropped.

But Michael Ward, an analyst with Benchmark Company LLC in New York City, said in a research report on Nov. 14 that Faraday is the only luxury battery electric vehicle manufacturer that can gain market share in China and the United States.

“China accounts for about 65% of global battery electric vehicle sales and luxury battery electric vehicle sales accounted for 80% of the U.S. market in the first 10 months (of the year),” Ward wrote in the report.

He also noted that the global car market was capital intensive and to remain competitive in electric powertrains the amount of investment will have to remain historically high to keep up with the competition.

“Delays in the adoption of company products could push out the expected time period for profitable performance and increase capital needs,” Ward wrote in the note. “(Faraday) and the global auto industry have been affected by component shortages, preventing (the company) from executing the timing of initial production and financing problems could delay the company’s ability to accelerate production to expected levels.”

But the company has lined up funding sources needed to finance accelerated production over the coming months, Ward said.

“Faraday expected to produce 1,000 vehicles (next year), double our current assumption, reflecting caution given the manufacturing complexities and supply disruptions that have plagued production of all-electric vehicles,” he added.

According to a form filed with the Securities and Exchange Commission on Nov. 13, Faraday is exploring “various funding and financing alternatives to fund its ongoing operations and to ramp up production, including equipment leasing, construction financing of the FF ieFactory California, secured syndicated debt financing, convertible notes, working capital loans, and equity offerings, among other options.”

The particular funding mechanisms, terms, timing and amounts are dependent on the company’s assessment of opportunities available in the marketplace and the circumstances of the business at the relevant time, the form said. 

Hannah Madans Welk
Hannah Madans Welk
Hannah Madans Welk is a managing editor at the Los Angeles Business Journal and the San Fernando Valley Business Journal. She previously covered real estate for the Los Angeles Business Journal. She has done work with publications including The Orange County Register, The Real Deal and doityourself.com.

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