Faraday Future, an electric vehicle startup, is a publicly-traded firm. It’s all right, I’ll give you a minute. Faraday Future has been a source of fascination for me for the past four years, and it has even surprised me a few times in recent weeks. But it’s true: the startup’s stock started trading on the Nasdaq stock exchange today, and a fresh $1 billion was poured into its shattered coffers.
Due to the growing popularity of special purpose acquisition firms, electric car startups are going public left and right (which you can read a great explanation of here). Companies that provide some of the new technologies that enable EVs, such as lithium-ion battery manufacturers, as well as companies in associated industries, such as autonomous vehicle startups and lidar sensor manufacturers, are also in the running.
Faraday Future, on the other hand, flirted with oblivion more than any of the other startups. Faraday Future has gone right up to the edge of bankruptcy over the last few years, guided by the whims of ebullient billionaire founder Jia Yueting, a guy who self-exiled from China to escape a tremendous amount of debt.
Along the road, a lot of things happened. Faraday Future was mistaken for a covert front operation for Apple’s self-driving car project after it was launched in 2014. At the 2016 Consumer Electronics Show, it unveiled a static prototype automobile while stating its intention to be as disruptive as the iPhone (after Jia compared Apple to Hitler – really, seriously). The next year, it returned to the trade show and presented a real electric vehicle, only to have everything go wrong and then stiff the firm that helped put on the event. It announced the construction of a $1 billion facility in the Nevada desert, but it never materialized (after passing up existing options, including the factory in Illinois that Rivian now occupies).
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Then came the real issue. Jia’s lavish spending — by 2017, he had invested $900 million into Faraday Future, much of it derived from loans he never repaid in China — had helped the business hire over 1,500 people and design a ludicrously expensive technological marvel of an electric SUV. However, he had difficulty attracting additional investors. He objected to the concept of relinquishing any control over the corporation, and this put off anyone with the financial means to create a plant and mass-produce an automobile on a large scale.
As a result, Faraday Future was running on fumes by late 2017. Its bank accounts held only a few million dollars. Angry with Jia, executives hired from Tesla, Apple, and other major corporations began to flee. After Jia rejected his suggestion to restructure Faraday Future in bankruptcy, the chief financial officer who had been brought in to save the firm left late that year. (That executive, along with a few other Faraday Future ex-employees, went on to form Canoo.)
Jia’s financial house of cards, Faraday Future, appeared to be on the verge of collapsing. The corporation was then given a strange lifeline towards the end of 2017. The money originated from Chinese real estate company Evergrande through a series of offshore shell companies, as The Verge reported in April 2018. Evergrande has pledged a total of $2 billion, with $800 million paid upfront and the balance paid in installments. Faraday Future had to be rescued.
It was till it wasn’t. Jia depleted the funds faster than Evergrande anticipated. Evergrande agreed to provide Faraday Future a cash advance on the balance of the investment in exchange for Jia relinquishing partial control. Jia legally fulfilled this, but he only did it by transferring his controlling interests to Chaoying Deng, the daughter of his right-hand lady (who I covered in this 2017 investigation).
This did not sit well with Evergrande. The two sides fought for months in a Hong Kong court over the dispute. Meanwhile, Faraday Future has run out of cash once more. Hundreds of employees were furloughed before being laid off. Most of the surviving top executives, including Jia’s sole remaining co-founder, left. Faraday Future eventually reached an agreement with Evergrande at the end of 2018 and spent much of 2019 in a state of dormancy, albeit it had to take a few more dramatic measures to keep the lights on, including selling its own headquarters.
Faraday Future took a key move in early 2019 that is undoubtedly the reason it was able to survive long enough to take advantage of the SPAC boom and go public. It began by collaborating with a restructuring business led by a bankruptcy expert. Faraday Future worked with this firm to persuade a number of owed-money suppliers to exchange their claims for shares in a trust that would payout if and when the startup raised funds. It also assisted in the refinancing of some of the startup’s debt.