What happened
After climbing sharply on Monday, shares of Faraday Future (FFIE -4.08%) have been on a downtrend, and they fell further out of favor with investors Thursday. During a session when the S&P 500 tumbled by 2.1%, shares of the electric vehicle start-up fared much worse, ending the day 14.8% lower.
While the usual suspects -- negative company news, an analyst's downgrade, insider selling, etc. -- were not in play, it seems that some investors were taking profits while others were recoiling from the stock due to the overall market weakness.
So what
On Monday, shares of Faraday Future raced higher as investors celebrated the company's announcement that it had locked in some much-needed financing. The $100 million that Faraday Future secured -- in two separate arrangements -- will help the company as it advances the development of the FF 91, which will be its first production vehicle.
The bloom, however, seems to be off the rose, and investors are no longer celebrating those deals. With signals continuing to emerge that a significant economic downturn is possible, investors are looking to fortify their portfolios with more recession-resilient stocks rather than more speculative names like Faraday Future. And after several days of downward drift, Faraday ended Thursday below the price where it closed last Friday, before Monday's surge.
Now what
With the Commerce Department reporting that the U.S. economy shrank at a 0.6% annual rate from April through June, investors have become even more fearful that the runway for growth stocks is not as sizable as they felt it was earlier in the year. It's unsurprising, therefore, that a company like Faraday Future, which is still in the pre-revenue phase of its development, is tumbling under the weight of investors' pessimism.
