Industry News: Faraday Future Wants To Scrap Financial Deal, Investor Accuses Company Of Trying to Break Deal

[William Maley]

On the surface, Faraday Future appears to been having a run of good luck. It had gotten a major investment from healthcare division of Chinese real estate group Evergrande; testing is continuing on their first EV, the FF 91; and the company has started building pre-production vehicles at its US plant. But trouble always seems to be looming and it has struck once again for the start-up automaker.

Yesterday, Reuters reported on a filing made by Evergrande Health for the Hong Kong stock exchange accusing Faraday Future of trying to cancel a deal to sell a 45 percent stake to Evergrande. Back in June, Evergrande Health agreed to buy the 45 percent stake into FF from previous owner Season Smart for $2 billion. It would begin with an $860 million initial payment, followed by installments of $600 million for 2019 and 2020. But Evergrande was notified a month later that FF had spent the $800 million it received from Season Smart back in December and was short on cash. It had agreed to pay $700 million ahead of schedule provided FF met certain undisclosed payment conditions.

But FF and CEO Jia Yueting has opened arbitration to nullify the deal as it said Evergrande did not fulfill its end of the bargain - providing the cash. Evergrande sees it very differently, accusing Yueting of manipulating board members to move forward with arbitration. The company also claims that FF wants to revoke Evergrande's ability to approve plans to raise more money.

That isn't the only money trouble FF is having. The Verge has learned from sources that a number of vendors and suppliers have not been paid in weeks. Emails that date back to August reveal Faraday Future representatives trying to explain the delay in payments is due to issues in payment processing. There are other excuses,

Quote

Others show repeated promises that checks were being issued, but awaiting signature, or held by the company’s “treasury department” for over a month, which two former employees who worked closely with Faraday Future’s finances say was the same stall tactic used in 2017 when the company was nearly out of money.

Emphasis mine.

One vendor told The Verge that an FF rep suggested they should hire a collection agency. Three other vendors have filed liens with the California Secretary of State - one of those totaling $400,000 for equipment sold to FF.

If that wasn't enough trouble for the company, FF's sole preproduction version of the FF91 caught on fire last month. The fire took place a few hours after the vehicle debuted at a “Futurist Day” event for its employees and families. The extent of damage is not clear as FF "made employees sign non-disclosure agreements specifically related to the fire," according to former employees. This is a major setback to the company's plan to begin production later this year.

Source: Reuters, The Verge

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[G. David Felt]

Bound to have a few startups go up in smoke