Why Faraday Future Stock Zoomed 19% Higher Today
What happened
Bucking the general trend over its lifetime as a stock, electric vehicle (EV) maker Faraday Future (NASDAQ: FFIE) saw a nice price boost on Monday. The pre-production company's shares accelerated nearly 19% forward, on news that it might just manage to keep its stock listed on the Nasdaq after all.
So what
After market hours on Friday, Faraday Future announced the results of a special meeting of stockholders convened the previous day. Three proposals were up for a vote, all of which passed by a wide margin.
Arguably the one with the most immediate effect was a measure authorizing the EV maker to do a reverse stock split. While stock splits, reverse or otherwise, have no material effect on a company's operations, they do change the math of its share count and price. A reverse stock split reduces the number of shares outstanding; since the market capitalization remains the same, the per-share price rises.
The authorization grants Faraday Future the scope to reverse-split its stock by a range of 1-for-2 to 1-for-10. It has not yet officially set the ratio.
The company also disclosed that it had received formal notice from the Nasdaq that it has until May 1, 2023, to lift its stock price consistently above $1 per share. Per the exchange's rules, a stock must trade for at least $1 per share in order to maintain its listing. Faraday Future's price hasn't been above that level since mid-September.
Now what
The reverse stock split vote provides a lifeline for the financially strapped Faraday Future, as does one of the other two proposals. This authorizes the company to have as many as 900 million shares outstanding, up from the previous level of 825 million.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
