To The Moon

One of the most popular names among short sellers is falling.Faraday Future$Faraday Future Intelligent Electric Inc.(FFIE)$ has recently risen to prominence among meme stocks. As short investors have hyped it up, the company has tried to garner a following for its luxury electric vehicle (EV). Recent turbulence regarding the startup’s board of directors is pushing FFIE stock down today, though. A prominent shareholder has filed to have businessman Brian Krolicki removed from the board after making a similar attempt last month.

What’s Happening With FFIE Stock

Faraday Future has been falling since markets opened. Despite a slight rally, it remains in the red for the day by more than 10%. Shares plunged 20% after a week of fairly steady gains. Analysts noted, the lack of company specific news and trading dynamics at play suggested that investors hadmarked FFIE stockas a likely short squeeze candidate. As he noted:

A short squeeze is an attempt to force bearish traders out of their positions. Traders wishing to short a particular security must first borrow the underlying shares to sell them. Should the stock fall down in price, the bears can then pick up the securities in question, return them to the lender and pocket the difference.

FFIE certainly has the markings of a short squeeze play.  Short interest remained above 25% of the stock’s float, even as the stock plunged. That high of a level is usually indicative of a coming short. On top of that, short investors have learned toward little knownEV stocksbefore. We saw it earlier this year when Mullen Automotive$Mullen Automotive(MULN)$ surged to impressive heightson short interest, demonstrating clear signs of the meme stock treatment.

Trouble at Headquarters

However, the turbulence at FFIE headquarters is important to note. As reports, “a recent 13-D filing by major shareholder FF Toprequesting the removalof Board Chairman Brian Krolicki has added to intrigue.” The shareholder expressed concern regarding the progress of the company’s flagship FF 91 luxury EV. Per the filing:

The Board of Directors (including Mr. Brian Krolicki) is not treating FF Top’s proposal with the gravity, urgency and fairness it deserves in light of the Issuer’s financial condition and the current adverse financing market conditions. The Reporting Persons continue to urge all members of the Board of Directors to exercise their respective independent fiduciary duties in the interests of the Issuer and all of its stockholders in order to secure the financing needed to safeguard the Issuer’s future and successfully deliver the FF91.

This isn’t the first time Krolicki’s removal has been requested. The same shareholder filed a similar motionin late June 2022 on the same grounds. In February 2021, Krolicki stepped down from his position as Chairman of the Board when a regulatory probe revealed that hemight have mislead shareholderson EV pre-orders. But this shareholder thinks he should have no involvement with the company at all.

As of now, Faraday Future has issued no statement on what action, if any, will be taken against Krolicki. It is unclear if this news will sway short sellers from FFIE stock in the short term before a squeeze. However, investors should still watch FFIE closely.