Faraday Future Intelligent Electric Stock Is Through the Roof. That’s Nuts

Al Root

Meme-stock madness has returned, sweeping up shares of struggling electric vehicle producers.

Shares of Faraday Future Intelligent Electric surged 383% on Tuesday. Shares are up another 70% in early trading Wednesday, at 49 cents apiece, while the S&P 500 and Nasdaq Composite were both up 0.5%.

On Monday, shares of VinFast Auto added almost 52%, moving in line with several stocks that made big gains during the pandemic-era meme-stock frenzy. GameStop and AMC Entertainment shares rose about 74% and 78%, respectively.

All three shares are heavily shorted, meaning a significant portion of their shares available for trading have been borrowed and sold by bearish investors betting on stock-price declines. If those stocks start to rise, they can be prone to gains that feed on themselves as short sellers rush to cover their bets. That pattern, known as a short squeeze, was behind the pandemic-era gains in the meme stocks.

The short interest in Faraday stock -- the number of shares shorted compared with the amount available for trading -- is about 99%, according to FactSet. That is an extremely unusual, and high, short-interest ratio.

But the amount of money involved is small. The two-day move in Faraday Future stock only creates about $18 million in market value. Shares are still down some 99.99% from their all-time closing high of $4,598.40 on Feb. 1, 2021, according to Dow Jones Market Data.

The company, which is attempting to build and sell ultraluxury EVs, has delivered a handful of its FF 91 cars. But it hasn't achieved the scale needed to operate profitably and is running low on cash.

The company's cash balance at the end of the third quarter was about $9 million, according to FactSet.

Faraday said in April that the Nasdaq has sent the company notice that its shares might be delisted, and that it planned to appeal the decision. Faraday hasn't filed its 2023 annual report yet.

Big stock moves can attract traders looking to make fast money. They should be careful though: The recent moves don't appear to have anything to do with company fundamentals.

Write to Al Root at allen.root@dowjones.com

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May 15, 2024 10:32 ET (14:32 GMT)

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