Caixin News Agency, June 25th (Reporter Xu Hao) - Faraday Future (FF) is racking its brains to stay on NASDAQ.
On June 25th, FF announced that the company had submitted a proposal for a reverse stock split (i.e. merger) with a maximum ratio of 40:1. The proposed reverse stock split aims to increase the market price of the company's common stock to mitigate the risk of delisting from the NASDAQ capital market. But if the stock price naturally reaches a long-term compliance level, the company may choose to postpone or not implement a reverse stock split.
The so-called "reverse stock split" refers to reducing the number of shares issued by a company to a small number of shares, while keeping the proportion of shares held by shareholders unchanged and not causing losses to shareholders. This practice usually only occurs when the stock price is low. As for the implementation ratio, it is mainly determined based on the current stock price.
It is understood that FF's stock price was lower than NASDAQ's minimum closing price requirement for listed companies for 30 consecutive trading days in December last year, so it received a non compliant notice from NASDAQ. Subsequently, the company failed to submit its annual financial report for the fiscal year 2023 on time, and its stock price remained below $0.1 for ten consecutive trading days, resulting in new non-compliance notices and subsequent delisting notices from NASDAQ.
At present, FF has taken a series of measures to restore compliance, including submitting the 2023 annual financial report 10-K file by the end of May, hiring a new independent audit firm, submitting a preliminary power of attorney containing a reverse stock split proposal, and promising to submit the first quarter financial report 10-Q file by the end of July. In addition, the company plans to submit its second quarter 10-Q financial report on time.
"If the company resumes compliance in its public documents, then the current non-compliance issue on NASDAQ will mainly be its low stock price," said industry insiders familiar with the US capital market. It is reported that FF has requested Nasdaq to extend the deadline for restoring stock price compliance until August 30, 2024, and informed the Nasdaq hearing team that the company's goal is to achieve a stock price of at least $5 per share through reverse stock split.
"This reverse stock split will not affect the ownership or voting rights of shareholders. The completion of the reverse stock split depends on market conditions and shareholder approval." FF stated that if the reverse stock split is no longer in the best interest of the company or shareholders, the board of directors may choose not to proceed with the reverse stock split.
Prior to this, FF had repeatedly adopted a "reverse stock split" approach to increase its stock price. In October 2022, FF shareholders approved a reverse equity split plan with an implementation ratio ranging from 2:1 to 10:1; On August 17th last year, FF shareholders approved a reverse equity split, with a implementation ratio ranging from 2:1 to 90:1; On February 5th this year, FF shareholders approved the reverse stock split plan again, with a ratio of 3:1.
However, due to the lack of performance support, the three reverse equity splits mentioned above did not have a significant boosting effect on FF's stock price. The 2023 financial report shows that FF's annual revenue was only $800000, but its net loss was as high as $432 million. As of May 23 this year, FF's cash balance was only $5 million, including $2 million in restricted funds.
FF stated in its financial report that although Faraday has started delivering FF 91 products in the future, there is insufficient demand for the model and related services, coupled with pressure from vehicle service and warranty costs, intensified market competition, deterioration of macroeconomic environment, changes in regulatory environment, and other risk factors, the company may continue to suffer huge losses and may never be able to achieve and maintain profitability. As of June 13th, FF has only delivered 12 FF 91 vehicles to users.
In response to the current difficulties, FF founder Jia Yueting proposed the "China US Automotive Industry Bridge Strategy" and will launch high-volume models worth 20-30000 US dollars and 30-40000 US dollars. Jia Yueting stated that the core technology used in the FF 91, priced at $300000, will be empowered to mass market models, applying the original concepts and models of LeTV Super TV and LeTV Super Phone to mass market models, including full process direct access to users, "twice performance and half price", and ultimate cost-effectiveness.
In addition, FF also plans to continue promoting strategic financing from the Middle East region. Once strategic investment is obtained, it will help improve the production and delivery of FF 91, and provide support for the ongoing FF "China US Automotive Industry Bridge Strategy".
In the eyes of industry insiders, raising stock prices through "technological means" is not a long-term solution for any enterprise; For FF, only by improving the current poor financial situation of the company as much as possible is the fundamental reason to stay on the "playing table".