Asian Tech Press (July 6) -- California-based electric car startup Faraday Future (NASDAQ:FFIE) closed Tuesday at $5.28, up nearly 50% with a total market value of $1.596 billion.
Over the past five days, Faraday Future Intelligent Electric Inc., also known as FF, has gained nearly 130%, sweeping away the concerns brought to investors by an earlier short-seller report.
The last week has been a harvest season for Faraday Future investors and its small and medium shareholders. FF shares surged 50% amidst a general downturn.
With the overall decline in the U.S. electric car market last week, Faraday Future rose 7.88% and 36.54% on two consecutive days of June 30 and July 1, respectively. Maintaining its growth momentum, the electric startup soared in Tuesday trading, rising to the daily high of $6.4 at one point.
While Faraday Future soared, third-party institutional investors also began to increase their holdings in the EV startup. According to U.S. investment research platform Morningstar Investor, the Vanguard Group Inc., the largest provider of mutual funds and the second-largest provider of exchange-traded funds, increased its holdings in the company by 823.63 million shares.
What is the secret behind Faraday Future's surges in share price?
Faraday Future Soars 50% Against the Market
Faraday Future surged 50% last week, a positive line that instantly changed shareholders' views on the company in investment forums, and earlier complaints in forums disappeared in the blink of an eye, replaced by hope for FF's future.
On June 30, the last trading day of the first half of 2022, the S&P 500 Index ended the period with a 20.58% drop, the worst first half of a year since 1970. During the same period, the tech-heavy Nasdaq fell 29.51%, and the Dow Jones Industrial Average dropped by 15.31%.
Under the general downturn, the U.S. stock market for new energy vehicles has weakened, with shares of electric car makers falling, including Tesla Inc. However, Faraday Future rose 7.88% against the market on the last day of the first half, sending a signal for the surges that followed.
On July 1, FF shares continued the upward trend of the last trading day, with gains quickly soaring to 20% at the opening of the day's trading, and eventually rising 36.54%. Between the two days, the California-based automaker rose by nearly 50%.
Faraday Future continued to rise on Tuesday, closing up 48.73% at $5.28 per share.
Notably, due to the rising share price, some institutional investors have also started to increase their holdings in FF. According to Morningstar Investor, among them, Vanguard Group increased its holdings by 8,236,277 shares, now owns 11,719,169 shares of the company.
Data shows that Vanguard Group, the world's largest provider of mutual funds, is the third largest shareholder of Faraday Future, and now manages more than $7.5 trillion in total assets.
Vanguard Group is also the number one shareholder of large-cap companies such as Apple Inc. and Microsoft Corp., and the second largest shareholder behind Elon Musk in the electric vehicle industry leader Tesla Inc.
Scott Conking, Vanguard Group's head of Asia, has said that the chance for investment success is not dependent on timing, but on the time to hold on for the long term. Holding a position in Faraday Future since its IPO last year, and continuing to increase its holdings now, implied that Vanguard Group is being bullish on FF's growth potential in the long run.
The Secret Behind the Soaring Stock Price
The sudden surge in FF shares after many days of continued slump has left many investors wondering: where is the logic behind the bigger gains?
U.S. stock analysts said the FF surge may come from two sources, one is that the EV maker is on track for mass production and delivery of its flagship luxury electric vehicle FF 91 in the third quarter of this year, and the other is that capital markets are bullish on FF founder Yueting Jia's ongoing board restructuring.
On June 24, Jia announced in FF's official app and his WeChat moments that the FF 91 will be seen in the next quarter.
The news release indicated that the mass production and delivery of the FF 91 in Q3 will not be affected by the company's ongoing board restructuring, and that its business is moving forward normally preparing everything for mass production and delivery.
Looking at the surge in share price, it can also be found that FF founder Yueting Jia's restructuring of the company's board of directors is accepted and supported by investment institutions, which also showed investors' dissatisfaction with FF board's earlier initiation of "suicide-like investigation".
In addition to the unqualified business skills and management competencies, FF board made mistakes one after another, not only sidelining the executive team including FF's Chinese founder, but also overreacting to a short-seller report, and it was the series of mistakes that made FF stocks dropped nearly 70% previously.
Jia's reorganization of FF board is a response to investors' requests and a move of compliance to defend and protect the interests of all FF investors, including its small and medium shareholders, according to an industry insider familiar with Faraday Future.
"Reorganizing FF board and setting things right completely, is the only solution for Faraday Future to tide over the crisis," the source said, "Previously, the failure and malfeasance of some independent directors in the board brought too serious losses to FF, perhaps also adversely affected the timely delivery of the FF 91, and now the capital market hopes that Yueting Jia can save the day."
Seeing from the 50% surge in share price, it can be found that the capital market has long lost confidence in FF's current board of directors, while Jia's ongoing board restructuring has won the recognition and support of investors, which is perhaps the biggest reason for the surge in Faraday Future.
Are Good Things Coming to Faraday Future?
U.S. stock analysts believed that there were other hidden factors in the FF surge in share price: a high likelihood of success in secondary fundraising and FF's plans to launch in China.
At Deutsche Bank's Global Auto Industry Conference in New York in June this year, Faraday Future's global CEO Carsten Breitfeld said that the company has been in talks with Chinese local governments and partners about starting EV production in China, and the company would raise funds in the second half of the year
Breitfeld added that Faraday Future was confident of securing more funding despite tough macroeconomic conditions.
Sources said that although FF founder Yueting Jia still has debt problems at home, he still has the support of many investors in China who want him to take back control of the board.
Now, with Jia's reorganization of the company's board, Chinese and Asia-Pacific investors who originally terminated financing talks with Faraday Future have now also restarted their negotiations with FF, which may be another hidden factor that prompted the company to soar in the Nasdaq stock market last week.
In terms of capital, the continued rise in FF's share price is a good thing for the company's ongoing financing, the landing of its China project, and the mass production and delivery of the FF 91 Futurist.
The sources said that Faraday Future is currently negotiating with a number of local governments, and that the EV maker's secondary fundraising is progressing smoothly and on schedule, and product deliveries are also moving forward as planned.
Faraday Future will mass produce and deliver its first electric car FF 91 in the third quarter of this year, and the market is now increasingly looking forward to it, hoping that the car will fill the market gap with no premium new energy vehicle in the luxury electric vehicle market.
Wedbush Securities analyst Daniel Ivesd said, "FF is being in a position of 'unique strength' in the luxury segment of consumer electric vehicles. We believe the company is set to create a new category in the EV space with its game-changing FF 91 vehicle and create a major brand within the high-end EV market opportunity."
Industry analysts said that the market positioning of FF 91's ultimate luxury technology will help it land in China quickly, thus changing the market situation that no super-luxury cars are available in China's new energy vehicle market.
