Faraday Future Wraps Up Dispute With Main Investor Without Incident - What Now?

Matt Posky
by Matt Posky

Faraday Future, the Chino-American EV developer that’s always in dutch, said Monday it has established and signed a new restructuring agreement with its main investor, Evergrande Health Industry Group Ltd. The deal concludes a rather ugly legal dispute between the two — one which placed Faraday’s intellectual property and finances in serious jeopardy.

Following the departure of co-founder Nick Sampson in November, the automaker found itself seeking new financing opportunities. Evergrande, which purchased a majority take in the EV firm via its summer acquisition of Season Smart, attempted to block new investments while Faraday accused the company of attempting a forcible takeover of the automaker by withholding funds earmarked for outstanding debts. Those funds were essential in helping it reach agreed-upon production targets.

Evergrande had agreed to take a 45-percent stake in the company for $2 billion in funding starting with “initial payments totaling $800 [million]” through early 2018, with the remaining $1.2 billion being issued over time. But those additional payments never came.

The new agreement effectively nullifies their earlier contract. Faraday notified the world on Monday:

“Today, FF (Faraday Future Inc.) and its investor Season Smart have announced that they have entered into a newly agreed upon restructuring agreement. Both parties agreed to terminate the previous investment contract, withdraw and waive all current litigation and arbitration proceedings, and release all security including the asset preservation pledge and equity financing rights.”

While this officially ends the dispute, it doesn’t guarantee the automaker another dime — and we know it needs every penny it can find to get its factory up and running. Whether you blame Faraday’s repeated mismanagement of funds or Evergrande’s withholding of promised capital, the carmaker endured mass layoffs just months before it was scheduled to commence mass assembly of its first model, the FF91.

Faraday Future claims it will be able to solve its cash problem “quickly” now that a new deal is in place, though this statement contains a familiar ring. In truth, this is another setback in a seemingly endless chain of disappointments. The company needs fresh funding, and fast, if it intends to build vehicles at its leased Californian factory. But there are other problems to contend with.

In addition to Sampson, FF has lost several essential members of its engineering team who will need to be replaced. In fact, there’s been a mass exodus of upper-level employees over the last twelve months, resulting in a shallower talent pool than we would be comfortable with.

Still, we should tempter our general negativity with a tiny nugget of hope. While Faraday has one of the worst track records of any automotive startup in recent memory, it continues to linger despite the deck always being stacked against it. We’re not presuming anything that would resemble a comeback, but we’d be shocked if FF fades into the history books at this juncture.

[Image: Faraday Future]

Matt Posky
Matt Posky

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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  • Inside Looking Out Inside Looking Out on Jan 02, 2019

    Is FF Chinese company or American company? It cannot be both like GM. BTW what's going on with Karma? I see commercials all over the place but do not see anyone talking about it. Beautiful car but not as practical as Camry.

  • SCE to AUX SCE to AUX on Jan 02, 2019

    "In truth, this is another setback in a seemingly endless chain of disappointments." Just like Tesla, which only sold 139,782 Model 3s in 2018, and they keep missing production targets. At $60k a pop, these guys are such losers.

    • Inside Looking Out Inside Looking Out on Jan 03, 2019

      It is almost the same number of sales as Cadillac, Acura, Infiniti, Lincoln. Only Buick sells twice as much as Model 3.

  • Charles The UAW makes me the opposite of patriotic
  • El scotto Wranglers are like good work boots, you can't make them any better. Rugged four wheel drive vehicles which ironically make great urban vehicles. Wagoneers were like handbags desired by affluent women. They've gone out of vogue. I can a Belgian company selling Jeep and Ram Trucks to a Chinese company.
  • El scotto So now would be a good time to buy an EV as a commuter car?
  • ToolGuy $1 billion / 333.3 million = $3 per U.S. person ¶ And what do I get for my 3 bucks -- cleaner air and lower fuel prices? I might be ok with this 🙂🙂
  • VoGhost Matt, I'm curious why you write that inventory levels are low at 74 days. Typically, 60 days is the benchmark for normal inventory.