Faraday Future Co-founder Calls It Quits; Majority Shareholder Has Odd Debt Solution
Faraday Future co-founder Nick Sampson has quit his executive post as the aspiring automaker continues struggling with finance issues relating to its latest financial backer and China’s second-largest real estate developer, Evergrande Group.
That leaves CEO Jia Yueting as the company’s only founding executive left on staff. But it would appear he might also leave, albeit under duress, if Faraday’s largest shareholder gets its way. While it’s not obvious exactly who shot first, the electric vehicle firm and Evergrande are at each other’s throats — ruining a $2 billion deal that was supposed to save the company and get its ambitious debut model, the FF 91, into production. Apparently, it was all too much for Sampson.
His leaving the company is a serious issue. As senior vice president of product R&D, he was instrumental in developing a vehicle that has not yet seen mass production, and was expected to begin work on a follow-up. Reuters reports that Peter Savagian, senior vice president for global product and technology, has also stepped down.
Faraday faults Evergrande’s withholding of funds as creating a legitimate crisis within the company. It is currently seeking financing from other sources, which could be blocked by its majority shareholder, according to an interim ruling earlier this month by a Hong Kong arbitration court. With the company also facing widespread salary cuts and prospective layoffs, it’s unclear how it could possibly rebound from this.
Assuming Evergrande manages to gain control of the company, it’s unclear what would actually happen outside of Jia being ousted from his leadership role. Since the start of its legal battle with the EV firm, some have alleged its only interests are the dismantlement of Faraday and the acquisition of its intellectual property. After that, it’s assumed the company’s remains will be brought back to China.
In June, the real estate giant agreed to purchase Season Smart, the finance business which owned 45 percent of Faraday Future, as part of plans to diversify into new technology. However, it now seems there is a chance this was only done this to fulfill Season Smart’s obligations to the EV company so it could assume ownership of the commercial finance services firm. Speculation, surely, but not without merit.
Evergrande has problems of its own. The company just sold $1.8 billion in bonds with coupons as high as 13.75 percent. Its own chairman, Hui Ka Yan, purchased $1 billion of the offer on Wednesday — which is a little odd.
Similarly to China’s LeEco, which was also founded and funded by Jia Yueting, Evergrande’s aggressive expansion is creating serious financial issues. Massive debt resulted in intense pressure to raise funds, hence the sale. Yet it has continued to expand, especially outside of China, despite being wildly overleveraged.
What goes around comes around, we suppose. But karmic revenge doesn’t really help Faraday get any closer to building a car.
[Image: Faraday Future]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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From the day they bought in, they were just waiting to bleed the company out so they could grab the IP at the fire sale.
Bummer. Sounds like the car was nearly ready to go and this was a bad-faith corporate-raider situation. I could imagine Tata buying the thing to have a ready-to-roll Range Rover EV to compete with all the other luxury EVs pushing six figures, though I've got to wonder how big that market really is, or whether they want to compete with their own Jag.