Faraday Future stock price comes back to earth and could get ugly

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Written on May 29, 2024

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Faraday Future published another weak financial report and withdrew its guidance.
It made a net loss of about $431 million, an improvement from the previous $602 million.
The company’s top challenge is that it has limited cash in its balance sheet.

Faraday Future (NASDAQ: FFIE) stock price has collapsed, erasing most of the gains it made earlier this month. After soaring to $3.90 on May 17th, the stock ended Tuesday at $1.17, a 70% plunge. It then slumped by over 30% in the pre-market session after the company published another set of weak financial results.

Faraday Future has made a lot of progress in the past few months. It started manufacturing its FF 91 Futurist vehicle in March and finished production in April. It also launched the AU TechLuxury FF912 vehicle that will start selling at $309k in the US and China.

Faraday Future stock chart

However, the company is still in trouble after spending over $3 billion in its lifetime and is at risk of going bankrupt. Its financial results published on Tuesday showed that its total sales in the 2023 financial year stood at just $784,000. Its net loss narrowed from $602 million in 2022 to $431 million. In a statement, the CEO Matthias Aydt said:

“Looking forward, I am excited by the future as we remain steadfast in our pursuit of growth through efficiency and the new markets we entered in 2023. We remain dedicated to elevating both our product strength and stockholder value.”

It is still unclear how Faraday Future will continue operating as a going concern because of its weak balance sheet. It ended the year with just $1.8 million in cash and $2.1 million in restricted cash, meaning that it will need to raise additional capital as soon as possible.

One way of raising this cash would be to sell its $34 million worth of inventories and possibly spend the $31.8 million worth of deposits. Still, even by doing so, I suspect that the company will need more money because it is losing tens of millions each quarter.

It is also unclear whether there is demand for $309k electric vehicles in the US and China. With that amount, one can easily buy some of the top luxury vehicles from companies like Ferrari and Porsche.

Also, the vehicle is more expensive than other luxury EVs. For example, BYD has unveiled a new luxury car known as the Yangwang U9 that starts at $233,450. Its goal is to be an alternative to Ferrari and Lamborghini. Lotus Technology sells Electre which starts at $123k.Faraday Future’s stock also plummeted after the company withdrew its production target for the year. This decline is in line with what I have warned about this month, as you can read here and here.