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One of the most popular names among short sellers is down today. Faraday’s future (NASDAQ:FIE) has recently risen to prominence among meme stocks. As short-term investors hyped it, the company tried to win a following for its luxury electric vehicle (EV). However, recent turmoil regarding the startup’s board of directors is dragging FFIE shares down today. A prominent shareholder has filed for the removal of businessman Brian Krolicki from the board after he made a similar attempt last month.
What happens with FFIE shares
Faraday Future has been down since markets opened today. Despite a slight rally, it remains in the red for the day by more than 10%. Shares plunged 20% yesterday after a week of fairly steady gains. As InvestorPlace Contributor Josh Enomoto noted that the lack of company-specific news and trading momentum at play suggested investors had marked FFIE stock as a likely near-term candidate. As he noted:
A short squeeze is an attempt to force bearish traders out of their positions. Traders wishing to short a particular security must first borrow the underlying stocks to sell them. If the stock price goes down, then bears can grab the securities in question, return them to the lender, and pocket the difference.
FFIE certainly has the marks of a short squeeze play. As of yesterday, short interest remained above 25% of the stock’s free float, even as the stock plunged. This high of a level is usually indicative of an upcoming short. On top of that, short investors learned of previously little-known EV stocks. We saw it earlier this year when Mullen Automotive (NASDAQ:MULN) hit impressive highs on short-term interest, showing clear signs of the treatment of meme stocks.
Problem at seat
However, the turbulence at FFIE headquarters is important to note. As Looking for Alpha reports, “a recent 13-D filing by major shareholder FF Top request deletion of board chairman Brian Krolicki added to the intrigue. The shareholder expressed concern about the progress of the company’s flagship FF 91 luxury electric vehicle. According to the file:
The Board of Directors (including Mr. Brian Krolicki) does not treat FF Top’s proposal with the seriousness, urgency and fairness it deserves in light of the Issuer’s financial situation and the conditions current unfavorable financing market conditions. The Reporting Persons continue to urge all members of the Board of Directors to exercise their respective independent fiduciary duties in the interests of the issuer and all of its shareholders to secure the necessary funding to safeguard the future of the transmitter and successfully deliver the FF91.
This is not the first time that Krolicki’s removal has been requested. The same shareholder filed a similar request end of June 2022 on the same land. In February 2021, Krolicki resigned as chairman of the board when a regulatory investigation revealed that he could have misled the shareholders on VE pre-orders. But this shareholder thinks he should have no involvement in the company.
As of now, Faraday Future has not issued any statement on what action, if any, will be taken against Krolicki. It is unclear whether this news will influence short sellers of FFIE shares in the short term ahead of a squeeze. However, investors should always keep a close eye on FFIE.
At the date of publication, Samuel O’Brient held (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.