DEFA14A: Faraday Future Announces Plans to Regain Nasdaq Compliance, Proposes Reverse Stock Split and Increase in Authorized Shares

Faraday Future is seeking stockholder approval for a reverse stock split and an increase in authorized shares to regain Nasdaq compliance and secure strategic financing.

Summary

• Faraday Future's Board of Directors has approved proposals to be submitted to stockholders for approval at the upcoming annual meeting.
• The proposals include authorizing the Board to effect a reverse stock split of the company's common stock at a range between 1-for-2 and 1-for-40 shares.
• The proposals also include increasing the number of authorized shares of the company's common stock.
• The company aims to regain compliance with Nasdaq listing standards, which include maintaining a minimum bid price of $1.00 per share.
• The company received deficiency notices from Nasdaq due to its stock price falling below the minimum bid price and its failure to timely file its 2023 Annual Report on Form 10-K.
• The company has requested a hearing with the Nasdaq Hearings Panel to share its plans to regain compliance.
• The company intends to file its first quarter Form 10-Q no later than the end of July and to timely file its second quarter Form 10-Q.
• The company is seeking strategic financing, including from the Middle East, but is constrained by a lack of available authorized shares.
• Securing strategic investments could allow for a ramp up in production and delivery of the FF 91 and support the development of the FF China-US Automotive Industry Bridge strategy.
• The company is considering hosting a retail investor community day.

Sentiment

Score: 4

Explanation: The document conveys a mixed sentiment. While the company is taking steps to address its challenges and pursue growth opportunities, the underlying issues of Nasdaq compliance and financial constraints raise concerns.

Positives

• The company has taken actions to regain compliance with Nasdaq listing standards, including filing its 2023 Annual Report on Form 10-K and engaging a new independent auditor.
• The company is actively pursuing strategic financing opportunities, including in the Middle East.
• The company has resumed vehicle deliveries with a new user taking delivery of his FF 91 2.0 Futurist Alliance on June 12.
• The company is exploring a US-China Automotive Industry Bridge strategy to leverage its expertise and capabilities.
• The company is upgrading the FF ieFactory to increase production capacity and improve product quality.

Negatives

• The company's stock price fell below Nasdaq's minimum bid price requirement, resulting in a deficiency notice.
• The company did not timely file its 2023 Annual Report on Form 10-K, leading to another deficiency notice and Nasdaq's determination to delist the company's securities.
• The company is constrained by a lack of available authorized shares, hindering its ability to secure equity-based or equity-linked strategic financing.
• The company acknowledges that the first reaction to a reverse stock split is typically negative.

Risks

• The company's ability to continue as a going concern and improve its liquidity and financial position is uncertain.
• The company's ability to satisfy the conditions for continued listing set forth by the Nasdaq Hearings Panel is not guaranteed.
• Stockholder approval for the reverse stock split and/or the increase in authorized shares may not be obtained.
• Factors unrelated to the reverse stock split may impact the per share trading price of the Common Stock.
• The company's ability to regain compliance with, and thereafter continue to comply with, the Nasdaq listing requirements is not assured.
• The ultimate decision of the Nasdaq Hearings Panel is uncertain.
• The company's ability to pay its outstanding obligations is not guaranteed.
• The company's ability to remediate its material weaknesses in internal control over financial reporting is uncertain.
• The company has a limited operating history and faces significant barriers to growth.
• The company has a history of losses and expects continued losses.

Future Outlook

The company plans to regain compliance with Nasdaq listing standards, secure strategic financing, and ramp up production and delivery of the FF 91. They are also exploring a US-China Automotive Industry Bridge strategy and considering a two-brand setup to distinguish market segments.

Management Comments

• Matthias Aydt, Global CEO at FF, stated, 'We are proud to have delivered our FF 91 2.0 to the marketplace in 2023, and recently we resumed vehicle delivery with a new user taking delivery of his FF 91 2.0 Futurist Alliance on June 12.'
• Matthias Aydt stated, 'Our preference is always to build shareholder confidence through our business performance itself.'
• Matthias Aydt stated, 'We are taking all necessary steps to regain compliance with Nasdaq listing requirements, including with respect to the minimum bid requirement and becoming and remaining current with our SEC filings.'

Industry Context

Faraday Future's efforts to secure strategic financing and develop a US-China Automotive Industry Bridge strategy reflect a broader trend of companies seeking global partnerships and expanding into new markets. The company's focus on electric vehicles aligns with the growing demand for sustainable transportation solutions.

Comparison to Industry Standards

• Tesla, a leading EV manufacturer, has successfully navigated Nasdaq listing requirements and secured substantial funding, setting a benchmark for other EV companies.
• Lucid Motors, another EV company, has also faced challenges in maintaining its stock price and achieving production targets, highlighting the competitive landscape.
• The proposed reverse stock split is a common strategy used by companies to regain compliance with minimum bid price requirements, but its success depends on various factors, including market conditions and investor sentiment.
• The company's plan to develop a US-China Automotive Industry Bridge strategy is similar to efforts by other automakers to leverage global supply chains and access new markets.

Stakeholder Impact

• Shareholders will be impacted by the reverse stock split and the potential dilution from the increase in authorized shares.
• Employees' job security is tied to the company's ability to secure financing and regain compliance.
• Customers' access to FF vehicles depends on the company's ability to ramp up production and delivery.
• Suppliers and creditors are affected by the company's financial stability and its ability to meet its obligations.

Next Steps

• Stockholder vote on the reverse stock split and increase in authorized shares.
• Decision from the Nasdaq Hearings Panel regarding the company's compliance plan.
• Filing of the first quarter Form 10-Q no later than the end of July.
• Continued pursuit of strategic financing opportunities.
• Potential hosting of a retail investor community day.

Key Dates

Keywords

Faraday Future, reverse stock split, Nasdaq compliance, strategic financing, authorized shares, FF 91, electric vehicles, delisting, minimum bid price, Middle East