Good Stock (PLTR) Falls for Bad Company (FFIE). OMG!
Hollywood Mystic.
One of the darling stocks in US stock market, at the moment is $Palantir Technologies Inc.(PLTR)$.
YTD it has chalked up an impressive gain of +152% (see below).
You could say PLTR is almost like an up & coming starlet in Hollywood, an “IT” girl of sort.
On the other hand, $Faraday Future Intelligent Electric Inc.(FFIE)$ a dubious EV stock, borned during the brief stint when :
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Special Purpose Acquisition Companies (SPACs) were all the rage.
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And electric vehicles (EVs) were all the rage (think $Tesla Motors(TSLA)$ the 1st commercial EV maker that had the world at its feet - then).
Similarly, Faraday can be likened to be the “Bad” boy of Hollywood, an actor with a bad reputation.
When I came across above news article, I cannot help but jumped into it. (see above)
After reading, the first question that came to mind was “What is a good girl like you, doing with a bad boy like him” ?
I think if Palantir could help it, it would not end up getting entangled with Faraday Future either.
The Whole Story.
Palantir Technologies stock is on a tear and (in a very surprise turn of event) the data analysis company has acquired shares of struggling electric vehicle start-up Faraday Future Intelligent Electric.
Yes, that is correct.
According to a recent filing with the Securities and Exchange Commission (SEC), Palantir, which provides services to government and commercial businesses, officially owns 1.1 million shares of Faraday Future.
The most likely reason is benign, but it still appeared to move shares of Faraday. (see below)
Wednesday - 9 Oct 2024.
The stock closed up +5.2% at $2.45 on wednesday:
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While the S&P 500 and Dow Jones Industrial Average added +0.7% and +1.0%, respectively.
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And PLTR gained +4.1%, closing at $43.13, a new 52-week high.
Finding out why Palantir owns the stock was not straight forward:
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There isn’t a compelling financial or strategic reason to own it.
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The best explanation appears to be the partial resolution of a long-running legal dispute.
Facts:
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Financially, Faraday does not have a lot of cash.
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It is not making a lot of EVs.
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It has only delivered a handful of its ultraluxury FF91 EVs.
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According to Bloomberg, no analysts cover the EV maker.
The Plus (+) Factor.
Faraday might have some attractive technology.
Just this September 2024, FFIE announced the launch of its 2nd brand, Faraday X, and its plans to create artificial intelligence electric vehicles (AIEVs).
The Twist.
Interestingly, Palantir had invested in Faraday when the latter was raising money via a SPAC merger back in 2021.
PLTR achieved this by “investing” $25 million into the Private Investment in Public Equity (PIPE) portion of the merger, where the company going public sells shares to outside companies looking to join the ride.
In exchange, Faraday Future signed a commercial contract with Palantir to use its services to help them, design and manufacture cars more efficiently.
Unfortunately, the partnership broke down.
According to SEC filings, in April 2023, Palantir sent Faraday Future a letter alleging the EV startup had breached the agreement and was owing $12.3 million.
In July 2023, Palantir filed a demand for arbitration claiming the “amount in controversy” was actually $41.5 million.
The Settlement.
As the story unfolds, we now know that both companies have been involved in litigation for years due to FFIE’s failure to pay for services rendered.
In March 2024, in a “quiet” settlement, Faraday agreed to pay Palantir $5 million in four-quarter installments in 2024.
In August 2024, the settlement was amended so Palantir could be paid in stock instead. It’s possible the stock was a form of payment.
The amendment came just before Faraday completed a one-for-40 reverse stock split.
The new Palantir holding is likely one of the tranches of stock owed. It appears to cover about half of the agreed-upon amount.
On 02 Oct 2024, PLTR was granted more than 800,000 shares in FFIE “as payment for certain outstanding receivables”, although there was no confirmation from either parties.
The stake is “worth” about $2.6 million, or 0.003% of Palantir’s that-day market value. With that, Palantir now owns roughly 9% of the stock outstanding.
Wall Street’s Verdict.
EV investors probably should not read anything positive or negative into the purchase.
At the same time, Palantir revealed the transaction in what’s known as a 13-G filing, meaning it intends to treat the stake passively, so it’s not likely that Palantir will try to hold sway over what little business Faraday Future has, pointless too.
Faraday Future was not a risk to existing EV players and was not developing lower-priced mass-market EVs.
Palantir does not appear to have plans to build EVs either.
My viewpoints : (mine only)
From the look of things, PLTR is holding onto a “dream” that one-day, FFIE will reclaim its peak stock price of $177.12, attained on 29 Jan 2021.
For PLTR to believe in the dream, FFIE must’ve somehow convinced its creditor.
As much as I hate to say it, I think FFIE is not a serious EV maker.
Just look, the company is (now) venturing into AIEV when it cannot even deliver its backlog of “ordinary” EV, minus the artificial intelligence element.
Although the baton has been passed from a checkered profile ex-CEO Jia Yueting to Matthias Aydt, it looks as though they are 2 sides of the same coin, in that delivery is still almost non-existent.
Does PLTR really possess some news-advantage on FFIE that will see its stock price skyrocketed again ? I say, don’t count on it !
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Do you think it was strategic of PLTR to accept FFIE shares instead of cash ?
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Do you think FFIE has some secret plans to revive interests in its EVs ?
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