FFIE: To Zero & Beyond and Plan B!
$Faraday Future Intelligent Electric Inc.(FFIE)$
Looking Back !
Faraday Future (FFIE) is a US stock that gave me one hell of a ride.
It is not even roller coaster, more of a downhill zipped line, all the way.
I bought it because:
- When I thought It has fallen sufficiently, down -93%.
- I know it has very solid technical specifications for its EV.
- Its EV is “truly” the creme de la creme of EVs - advanced technology, great horsepower, plush interiors, sleek designs etc..
- The technical details are its intellectual property (IP) and assets.
Unfortunately, after 3 years in operations, it managed to churn out 10 EVs in 2023?
This average out to 0.83 EV per month.
This is truly artisanal creation where every piece, down to its bolts and nuts are painstakingly hand assembled ! Ha, ha, ha.
I could only imagine that its manufacturing process is 100% manual labour with nary an automation in the process.
For that, it commands a premium for its creative invention at a whooping $250,000 per EV.
And that is only the entry level EV.
Reality Check.
Like the US market that got really spooked after the 09 Apr 2024 CPI inflation report was out, Faraday was not spared either.
It just keep falling week after week; almost spiralling out of control.
It has achieved “meme” status to me.
I am “not” surprised that it will continue to “dump” by short sellers until it attains zero dollar value share price.
What’s Gonna Happen?
I have been asking myself, what is going to happen to FFIE, if it continues to fall next week and hits $0.00 per share?
For sure, it cannot sink further into negative territory right !
I did some research just to get myself mentally prepared for doomsday arrival.
Here are my findings; just in case you are a Faraday shareholder like me.
(1) Shareholders would lose their investment.
Since a stock represents ownership in a company, a share price of zero means the stock itself becomes worthless.
Any investment shareholders made in FFIE would be lost entirely.
(2) Delisting from Nasdaq Global Exchange.
Based on rule of thumb, major stock exchanges typically delist stocks that trade below a certain price point for a sustained period. -
This means FFIE shares would no longer be tradable on Nasdaq.
(3) Trading on over-the-counter (OTC) markets:
If delisted, FFIE might move to OTC markets, which are less regulated than major exchanges.
Trading here would be less transparent and likely have lower volume.
(4) Company's financial health:
A zero stock price can be a sign of significant financial trouble for FFIE.
The company might struggle to raise capital, and its ability to operate could be hampered.
(5) Negative impact on reputation.
A stock price at zero will damage FFIE's reputation and make it harder to attract investors or partners in the future.
Above are but hypothetical possibilities should FFIE’s stock price continues to free fall.
There are several options available to FFIE “the company” to avoid reaching this point, Eg. stock splits (which they have undertaken, mergers, or restructuring) .
Available Options (to shareholders):
Even if a company's stock price falls to zero, it does not mean the company itself has zero value.
(1) Order of Claims.
In the event of liquidation (ie. company sells all its assets and goes out of business), shareholders are last in line to receive any remaining money.
(2) Debt Settlement.
Before shareholders, the company must settle its (a) debts with creditors, (b) bondholders, and (c) other parties it owes money to; in descending priority.
These claims are paid in a specific order determined by bankruptcy law.
(3) Potential Shareholder Repayment:
Only after all debts are settled and if there's any money left, only then would it go towards shareholders.
In a situation where the stock price is zero, it's highly unlikely there would be anything remaining for shareholders after all debts are paid.
(4) Shareholder Lawsuits:
In some incidences, shareholders may file lawsuits against the company's management if they believe actions were taken that caused the company's value to plummet.
(5) Free Cash Flow (FCF):
Even with positive FCF (money left over after operating expenses and capital expenditures), it wouldn't directly benefit shareholders in this situation.
The FCF would first be used to pay down debt and wouldn't reach shareholders until after liquidation and settling all prior claims.
Summary:
- A zero stock price doesn't necessarily mean zero company value, but it suggests significant financial difficulties.
- Shareholders are the last in line to receive any money during liquidation.
- Positive FCF wouldn't directly benefit shareholders in this scenario.
It's important to remember that investing in any stock carries risk.
A company reaching a zero stock price is a worst-case scenario.
- Do you think Faraday has achieved “meme” status amongst traders and investors?
- Do you think Faraday will continue to fall this week?
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Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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