FFIE Stock Alert: Faraday Future Issues Going Concern Warning

Shares of the premium manufacturer of electric vehicles (EV) Faraday future (NASDAQ:FFI) suffered a sharp drop on Wednesday, with management warning that the company could file for bankruptcy if it is unable to raise additional capital. Unfortunately, the pricing of Faraday’s electric vehicles has resulted in a very limited market, as evidenced by the company’s disappointing sales. Therefore, FFIE stock is likely to be delisted unless a lifeline is provided.

In a Form 10-K filed with the U.S. Securities and Exchange Commission (SEC), Faraday indicated a going concern risk. Specifically, management warned that the company “does not have sufficient liquidity to meet its outstanding obligations and continue as a going concern.” Unfortunately, the company said it would likely file for bankruptcy protection if it could not raise new financing.

While this is an alarming revelation, it is also not a huge surprise. Faraday Future only recently announced its rather dismal financial picture for the full year 2023. Last year, the electric car maker sold just four vehicles and leased six. Revenue from automobile sales for the 12 months ending December 31, 2023, was just $784,000.

To make matters worse, research and development costs reached $132 million in 2023. While that’s a significant drop from nearly $300 million in 2022, Faraday is still far from where it should be.

FFIE shares face delisting in light of increasing problems

While the financials are ugly, what’s worse is that Faraday is behind on required disclosures for the period ending March 31, 2024. As a result, shareholders of FFIE stock are fleeing.

On Tuesday, management announced that it had received an expected letter from the Nasdaq This suggests that the electric car maker failed to file its first-quarter Form 10-Q on time. This matter “could serve as additional basis for delisting” FFIE stock. Previously, the stock had also attracted attention for falling below the exchange’s minimum bid price of $1.

In fairness, Faraday has requested a hearing before the Nasdaq Hearings Panel. If the hearing is granted, management intends to present its proposed Form 10-Q filing and its plans to correct the deficiencies in the listing standards.

Despite all efforts, the demise of FFIE stock was foreseeable from the start. With Faraday electric vehicles priced at over $300,000, the market for buyers was always going to be limited. This is no longer speculation, but a harsh reality given the low sales figures.

Amazingly, management admitted in its Form 10-K that pricing was a key competitive factor in the electric vehicle market. By going far beyond the norm, Faraday made itself dependent on an extremely niche consumer segment.

At the time of publication, Josh Enomoto did not hold (either 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 Publishing guidelines.