Faraday Future's (FFIE -7.59%) stock recently plunged to an all-time low of about $1 after it updated its near-term expectations. The electric vehicle maker, which went public by merging with a special purpose acquisition company (SPAC) last July, now expects to launch its first vehicle -- the FF 91 SUV -- in the fourth quarter of 2022.
During its pre-merger presentation last February, Faraday claimed that it could launch the premium "Futurist" version of the FF 91 in the first quarter of 2022, which ended on March 31. It missed that target, and Faraday postponed its launch to the "third or fourth quarter" in July. Therefore, Faraday's latest update merely seems to kick the can further down the road.
Image source: Faraday Future.
However, Faraday also can't afford any more significant delays -- its losses are widening and it's running out of cash. So is it too late to buy Faraday's stock, which hit an all-time high of $19.16 last February, as it approaches the delisting threshold of a dollar per share?
What does Faraday Future do?
Faraday believes it can stand out in the crowded EV market by selling much pricier vehicles than Tesla. Its first vehicle, the FF 91 Futurist, starts at about $180,000, and is powered by a 1,050-horsepower engine with a range of 378 miles.
Lucid's comparable Air Grand Touring Performance sedan, which starts at $154,000, also has a 1,050-horsepower engine, but boasts a longer range of 516 miles. Faraday plans to subsequently launch a cheaper standard version of the FF 91 for about $100,000, which would presumably compete against Lucid's standard Air sedan and other luxury EVs.
A troubled past and an eleventh-hour deal
Faraday was founded in 2014, and it originally planned to launch its first vehicles in 2017. However, ongoing funding problems, numerous controversies regarding its finances, and an abrupt decision to scrap the construction of its Nevada plant and move to California all caused it to miss that goal.
Other red flags quickly appeared. In late 2017, Faraday's CFO Stefan Krause and CTO Ulrich Kranz resigned and co-founded another EV maker called Evelozcity, which is now known as Canoo. In 2019, Faraday's founder and CEO Jia Yueting filed for bankruptcy protection and was succeeded by Carsten Breitfeld, the CEO of the EV start-up Byton.
Faraday would likely have gone bankrupt if it hadn't merged with Property Solutions Acquisition Corp. during the timely flood of SPAC-backed EV mergers in 2021. But after the merger, its problems became more apparent. Its didn't generate any revenue in 2021, since it hadn't produced any vehicles yet, but its net loss widened from $147 million to $517 million and it held just $505 million in cash.
Does Faraday have a future?
In the first quarter of 2022, Faraday's net loss widened year-over-year from $76 million to $153 million. Its cash reserves shrank to $276 million, but it was still shouldering $271 million in total liabilities. It's already racked up a total deficit of about $3 billion since its inception, and its losses will continue to widen as it desperately tries to deliver its first vehicle by the end of the year.
Faraday had received 401 preorders for its FF 91 SUVs by the end of the first quarter, so there's still some pent-up demand for its high-end EVs. But all those orders are fully refundable, and that demand falls woefully short of the 2,400 vehicles it originally claimed it could deliver in 2022.
Faraday's first plant in California hasn't even opened yet, and the company will likely encounter the same supply chain headwinds that forced better-run EV makers like Rivian and Lucid to reduce their full-year production forecasts over the past year.
To make matters worse, a major shareholder has been trying to oust Faraday's chairman Brian Krolicki, the former lieutenant governor of Nevada, from its board of directors since late July. As that internal battle drags on, Faraday also needs to deal with a subpoena from the Securities and Exchange Commission (SEC) regarding allegations that it had made inaccurate statements to investors.
There's no reason to buy Faraday Future's stock
Faraday is ironically stuck in the same sinking boat as Canoo, which also hasn't produced a single vehicle but is running out of cash. Faraday's spotty past and current problems make it even less appealing.
Investors looking for a speculative EV stock should stick with Lucid or Rivian, which have started manufacturing and shipping vehicles, instead of dying companies like Faraday and Canoo. Investors looking for a more reliable play on the growing market should also probably simply stick with Tesla.
