Faraday Future Stock Alert: Did FFIE Just Dodge a Bullet?

Faraday Future Intelligent Electric (NASDAQ:FFI) may have gotten off lightly once again. The electric vehicle manufacturer was under pressure to delist its shares from the Nasdaq stock exchange.

First, Faraday Future was threatened with delisting because it failed to file its annual report on time and its stock traded below a dollar per share for 30 consecutive days. Then Faraday Future was notified that it too was threatened with delisting because FFIE’s stock traded below 10 cents per share for 10 consecutive days.

The electric vehicle maker was lucky because the meme stock hype started just in time, driving Faraday Future stock price to well over $3 per share (at least for one day).

The stock price remained above $1 for a week, which may have delayed any delisting investigation, especially since Faraday Future obtained a stay of proceedings for the duration of its appeal.

Of course, as expected, the FFIE has crashed again and is now at 50 cents, but that is at least above the 10 cent threshold.

The problem for investors investing in Faraday Future stock is that the company is still under fire and is unlikely to have such good luck in the future.

Not a good deal

The electric car maker has just started delivering its second-generation FF91 vehicles after a four-month hiatus. In November, it halted deliveries of its top-of-the-range luxury electric cars because it had “significant doubts” about its ability to continue as a company. That situation has not improved in the months since.

As my colleague Samuel O’Brient also noted, “deliveries” is a misnomer. This was a single vehicle to a high-profile buyer. It’s not as if Faraday Future has fired up the assembly line and started producing vehicles again. There are significant doubts that the automaker is a viable business.

The company regularly warns that it will not survive unless it can raise more money. And it is very likely that it will not survive.

Bankruptcy is imminent

In its delayed fourth-quarter and full-year report, Faraday Future said it ended the year with less than $2 million in cash. It also had $2.1 million in restricted cash, but that is money held back for specific purposes and cannot be accessed for normal business use.

For investors, this means that Faraday Future will eventually be delisted. There is no reason for the stock to be this high, let alone go any higher. While the company could move to the pink sheets and trade over-the-counter as a penny stock, it will most likely file for bankruptcy.

There are several types of bankruptcy that the electric car maker could use. One of them allows a company to pay down its debt and reorganize itself to emerge as a leaner, more financially stable company. I don’t think Faraday Future would use that type of bankruptcy.

There is not a lot of debt that needs to be paid down. Rather, I think the luxury automaker will go the liquidation route, where it simply sells its assets and tries to get as much cash as possible.

Heavy fire

The electric vehicle market is simply not favorable for Faraday Future. With sales of affordable As electric vehicle numbers decline, there is little demand for the high-end luxury electric vehicles that Faraday produces (if the company even makes a car).

Lucid Group (NASDAQ:LCID) has the same problem. The company makes luxury electric cars that seem cheap compared to the FF91, but even for them it can’t find a market. Mercedes Benz (OTCQB:MBGYY) has also had difficulty selling electric vehicles and will focus more on hybrid vehicles in the immediate future.

And that’s the problem with focusing too much on a niche. Tesla (NASDAQ:TSL) wanted to make its cars accessible to the masses and was successful. When you break the industry down into smaller, more expensive segments, you limit your ability to sell enough cars to make it worthwhile.

Faraday Future Intelligent Electric went after the elite of electric car buyers and shot itself in the foot. By definition, the company cut itself off from 99% of all potential customers. And now, due to financial problems, not even the super-rich will buy its electric cars.

The Faraday Future stock has no future, so investors should stay away.

At the time of publication, Rich Duprey did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s disclosure policies.