Faraday Future stock: an outright bargain or a value trap?
The Faraday Future (NASDAQ: FFIE) stock price sell-off continued ahead of its first-quarter results and after the company raised capital. The shares plunged by almost 20% to $0.197, the lowest level on record. It has fallen from an all-time high of $20.75.
Faraday Future earnings
One of the top electric vehicle news came out on Wednesday when Faraday Future announced its new financing. The company announced that it had signed agreements for $100 million in financing in unsecured convertible notes worth $100 million.
The company will raise these funds from Metaverse Horizon, FF Global Partners, and VW Investment Holdings. FF is made of 20 current and former senior executives at the company.
These funds will help the company ramp up production of its flagship FF 91 vehicle. Therefore, the shares slumped because of the dilution impact of the capital raise. The $100 million amount is substantial since the company has a market cap of $288 million.
Further, ther are concerns that Faraday Future will need more money if it has to compete with the likes of Lucid, Rivian, and Fisker Automotive. It simply costs too much money to build and ramp up EV production in the US even with Faraday’s asset-light model. As part of this deal, the company has partnered with Myoung Shin, which is manufacturing the vehicle.
The next key catalyst for the Faraday Future stock price will be the company’s earnings scheduled for Thursday after the market closes. Analysts expect that the company’s cash burn continued in the quarter as it prepares to ramp up its production. The most recent quarter showed that the company lost $154 million in the fourth quarter after losing $84 million in the same quarter of 2021.
Further, Faraday Future will likely have a reverse split to meet with Nasdaq listing requirements. Last week, the company received a 180-day extension for its listing.
Faraday Future stock forecast
In my last article, on FFIE stock, I warned that the shares would continue falling. This forecast was accurate as the stock has moved close to its record low. The shares have moved below all moving averages while the Relative Strength Index (RSI) has drifted downwards.
I suspect that the shares will continue falling in the coming months as sellers target the key support at $0.10. However, I can’t rule out a situation where the stock has a dead cat bounce after it publishes its financial results.
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