The Stock of Faraday Future Rises at the End of a Roller-Coaster Month for the 'Classic' Meme Company

Shares of electric-vehicle startup Faraday Future Intelligent Electric Inc. saw a slight pullback on Friday after a turbulent period marked by significant gains and record declines.

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On Wednesday, Faraday Future shares experienced their largest-ever daily percentage drop, followed by a strong rebound on Thursday. By the end of Friday’s session, the shares had risen 3.2%, with a trading volume of 219.42 million shares, surpassing the 65-day average volume of 161.82 million shares.

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According to Stocktwits, a social platform for investors and traders, community sentiment towards Faraday Future turned “extremely bullish” on May 13. Many users highlighted an improved technical outlook for the stock. Stocktwits stated, “Prices and momentum had stabilized the week prior and saw their first strong up day on the 13th, rising 32%. That immediately put the stock back on momentum traders’ radars.”

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Faraday Future shares then skyrocketed 367.5% on May 14, followed by gains of 147.2% and 134% over the next two sessions. This surge was driven by the return of influential trader Keith Gill, known as Roaring Kitty, to social media. According to Stocktwits, “That also encouraged traders to look for other heavily-shorted stocks, like Faraday, that could see a major squeeze.”

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However, this rally was short-lived as Faraday Future’s earnings report brought the stock back to reality on Wednesday. The EV startup reported full-year revenue of $800,000 for 2023, compared to no revenue in 2022, and a loss of $432 million, down from a $602 million loss in 2022. The company only began delivering vehicles in the third quarter of 2023 and has yet to report first-quarter results.

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Faraday Future’s cash balance as of December 31, 2023, was $4 million, including $2 million in restricted cash, down from $17 million at the end of the previous year. As of May 23, the company’s cash position was approximately $5 million, including $2 million in restricted cash. On Tuesday, Faraday Future issued a “going concern” warning due to its financial situation.

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Despite this, Stocktwits views Faraday Future as a quintessential meme stock. “The stock price’s main mechanism for rising is market mechanics, not business fundamentals,” the platform explained. “There is a core group of investors who believe in the company’s long-term vision and potential. However, the vast majority of the discussion and following is related to its price momentum, short-squeeze potential, and other market-related factors.”

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Faraday Future is currently on the Nasdaq’s Reg SHO threshold list. This list includes securities where, for five consecutive settlement days, there are aggregate fails to deliver of 10,000 shares or more per security, and the level of fails is at least one-half of 1% of the issuer’s total shares outstanding. The SEC’s Regulation SHO was introduced to address issues related to naked short selling.

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The stock has continued to attract attention from meme-stock traders, notably an individual known as Obi. However, Faraday Future shares have declined 15.8% in 2024, compared to a 10.6% gain in the S&P 500 index.

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