Text/Zhou Xiongfei
Edit/Midnight
The phrase "New Year, New Atmosphere" may not apply to Jia Yueting and the future of Faraday, which he founded.
While everyone was celebrating the Spring Festival of the Year of the Tiger, Faraday Future's Independent Special Commission of Inquiry released a report that said that through the investigation, there were certain inconsistencies with the facts in the statements issued by FF investors, as well as certain weaknesses in corporate governance and compliance.
The investigation report released by the FF Independent Special Investigation Committee, screenshot from the announcement
Among them, there are two main places where there are so-called "inconsistencies", one is that "FF has previously announced that there have been 14,000 FF 91 orders", but according to the investigation, "the number of this order may be misleading, because only a few hundred of these orders are paid, and the rest are not paid." ”
Second, the survey report pointed out that it "underestimated Jia Yueting's participation in FF". As early as 2019, Jia Yueting announced his resignation as CEO of FF and became the CPUO (Chief Product & User Experience Officer) of FF. However, according to the investigation, Jia Yueting still holds a strong voice within FF.
It should be noted that this independent special investigation committee originated from the fact that FF was specially established in response to short selling after it was shorted by J Capital Research, a US short-selling agency, last October. In this regard, after the independent special investigation committee released the investigation report, it was once regarded as the "self-exposure" of FF by the industry.
However, the investigation report issued by the independent special investigation committee also clearly mentions that "there is no evidence to confirm the allegations mentioned in the short reports submitted by the previous short-selling agencies".
Although there is no evidence to support the short claim, with this "self-exposure", it is likely to plunge Jia Yueting and FF into a deeper crisis of trust. After all, this "self-exposure" means that Jia Yueting and FF have lied to the public and the industry, coupled with the previously promised FF 91 mass production has repeatedly jumped votes, and the first financial report after listing has also been postponed.
After such a series of "untrustworthy" behaviors, who still dares to believe Jia Yueting, who still dares to buy FF?
1. The amount of orders that are exaggerated
"We have received more than 14,000 bookings for FF 91 vehicles."
In July last year, FF further described the mass production of FF 91 in its listing prospectus, saying that it would achieve mass production in July this year, and revealed the scheduled situation of FF 91 at that time. The announcement of this order volume has attracted widespread attention inside and outside the industry for a while.
Coupled with the fact that Jia Yueting personally took the FF 91 to participate in the listing ceremony and the first FF offline experience store settled on the streets of Manhattan, New York, USA, these information are considered by the industry to be a precursor to the mass production of FF 91.
But what was not expected was that just half a year later, FF "exposed" the false suspicion of order volume through an independent special investigation committee.
In a report filed by FF's Independent Special Inquiry Commission to the U.S. Securities Regulatory Commission, they said that "the FF's previous claim in the listing prospectus that it has received more than 14,000 bookings for FF 91 vehicles" may be misleading because only a few hundred of these bookings have been paid, while the others (totaling 14,000) have not been paid. ”
Description of order fraud in the investigation report, screenshot from the report
A new energy vehicle company salesman told Wired Travel that the real reservation order that can be regarded as a real reservation must be an order that has completed the payment of the deposit, and no payment cannot be counted as an order.
In fact, before the release of this investigation report, some short-selling institutions have questioned the order volume of FF.
At the end of January last year, Jia Yueting announced that FF would be listed through SPAC, and before releasing the prospectus, he also took the lead in revealing the order situation of FF 91, saying that FF's first flagship model, FF 91, has received more than 14,000 orders.
But soon, this was questioned by the short-selling agency Hindenburg, which said that through the investigation, it could be considered that the volume of orders declared by FF was fake. FF did not respond to this question, but after that, FF did not mention information related to the order volume in public.
After that, FF's listing plan continued, and the listing was completed in early July last year. But just three months after FF was listed, another short-selling institution targeted FF.
In early October, short-selling J Capital Research released a short-selling report on FF and made a point on the front page of the 28-page report that "we don't think FF can sell even one car." ”
In the report, the agency first targeted the large order volume announced by FF in January last year. They believe that the order volume claimed by FF is false, because through the survey, it was found that 78% of the orders claimed by FF came from the same company, and this company is likely to be a subsidiary of FF.
This means that a large part of the orders announced by FF come from the "left hand to right hand" trick, rather than from real consumers.
Second, the agency also said in its short-selling report that FF had abandoned five plants, including the plants promised to be built in North Las Vegas and Vallejo in California, and the factories in Deqing, Zhuhai and Guangzhou in China.
FF has written in the listing prospectus that its Hanford plant is in full swing and is expected to complete mass production of the FF 91 within 7 months. But through the agency's visit, the factory in the prospectus was silent, and there was no sign of starting work.
J Capital Research field shot FF Hanford factory, image source short report
In addition to factory factors, J Capital Research also demonstrated from a technical point of view that FF could not deliver such a large number of orders.
In their view, due to the durability of parts and suppliers, it is difficult to achieve large-scale mass production of FF 91, "basically no supply chain manufacturers will take over FF's business," J Capital Research quoted an internal FF executive as saying.
In terms of parts, mainly for power batteries, J Capital Research has interviewed two former executives inside FF, who said that the power battery equipped with FF 91 has the risk of leakage or even explosion.
In response to the questions of these institutions, Jia Yueting quickly responded on social platforms with "cold rice and hot stir-fry, nonsense"; FF officials also issued a statement later saying that in the face of doubts, FF specially set up a special committee of independent directors to investigate allegations of inaccurate disclosure of short-selling institutions, which is the independent special investigation committee mentioned above.
Now, through the investigation of the Independent Special Investigation Committee, although to a certain extent, it proves that there is no evidence for the previous doubts of short-selling institutions such as J Capital Research, but at the same time, it also "self-exposed" to prove that the amount of orders previously announced by FF is suspected of exaggeration.
In addition, Jia Yueting's right to speak within FF has also become the focus of this round of questioning.
2. Is the FF surname "Jia"?
"Jia Yueting's participation in the management of the company after the listing of FF is more important than that of many shareholders."
In its investigative report, the Independent Special Investigation Committee described Jia Yueting's voice within FF. In their view, the public and investors are likely to underestimate Jia Yueting's participation in FF, especially after Jia Yueting resigned as CEO of FF.
In September 2019, FF released a message on its official website, official micro and official public account, announcing the appointment of former "father of BMW i8" Bi Fukang as FF global CEO, and FF founder Jia Yueting will resign from the original global CEO position and transfer to the position of CPUO.
At that time, FF officials revealed that after Bi Fukang assumed the position of global CEO of FF, he would fully lead the FF core team to achieve strategic goals, continue to build industry-leading technologies and products, and focus on promoting ongoing financing activities.
For Jia Yueting, he will hand over control of FF and be responsible for the overall implementation of the Internet ecosystem strategy, leading related work such as artificial intelligence, product definition, user acquisition, user experience and user operation.
In July 2020, Jia Yueting posted a blog post titled "Part-time Work and Entrepreneurship, Restart Life, Apologies, Thanksgiving and Commitment with Me" on his personal Weibo, which mainly announced that his personal bankruptcy and restructuring case was finally completed, he did not need to bear $2.96 billion in debt, and all the debts would be put into the trust fund of FF equity.
Jia Yueting's open letter, the source of the picture Jia Yueting's personal Weibo
In this regard, in the industry, it seems that the reason why Jia Yueting resigned as CEO of FF before was mainly to achieve the purpose of personal bankruptcy.
For this speculation, Jia Yueting said, "The reason why I will give up everything is to make FF complete, completely repay the remaining guarantee debt as soon as possible, and realize the dream of transforming the automobile industry." ”
As everyone knows, after this, Jia Yueting still controls FF in different ways.
According to the prospectus submitted by FF, the board of directors will be formed after the listing of FF, and the board members will have 9 seats. For the appointment of board members, the FF management committee participates, which can designate 4 of the directors, and the CEO of FF must be a member of the board, so the FF management committee can actually appoint 5 directors.
Five of the 9 board members may be determined by the FF Management Committee, and according to the legal determination rules of the Chinese mainland, if an interest group controls more than half of the board members of a company, then the group can be found to actually control the company.
Although Jia Yueting served as the CPUO of FF after resigning as CEO of FF, it should be noted that he is still a member of the FF management committee. According to foreign media The Verge, Wang Jiawei, who serves as vice president of FF's global capital markets, is the nephew of Jia Yueting, who is also a member of the FF management committee.
Coincidentally, the short-selling agency J Capital Research also mentioned in their short-selling report that "Jia Yueting may still control FF company through direct control, holding positions, hiring relatives (nephew Wang Jiawei) and so on." ”
This means that Jia Yueting seems to have taken the initiative to get out of control of FF, but in fact, FF is still "surnamed Jia".
In the face of the fact that Jia Yueting used management to lay out his rights, the FF Independent Special Investigation Committee also listed a series of remedies in the investigation report, including the newly appointed Susan Swenson as the executive chairman of the board, FF CEO Bi Fukang and CPUO Jia Yueting will report to him, and the annual basic salary of both of them will be reduced by 25%.
Under the new leadership structure, Brian Krolicki will step down as Chairman of the Board of Directors and Chairman of the Corporate Governance and Nomination Committee of the Board to become a member of the Audit and Compensation Committee of the Board; Jordan Vogel will step down as The Governance and Nomination Committee of FF as Lead Independent Director; scott Vogel will become Chairman of the Audit Committee, Corporate Governance and Nomination Committee of the Board.
In addition, Wang Jiawei, vice president of FF Global Capital Markets, who is related to Jia Yueting, will be suspended without pay.
The remedies listed by the FF Independent Investigation Special Committee, screenshots from the report
According to Wired Travel, the above remedies were approved by the FF Special Committee on January 26, 2022, and approved at the FF Board Meeting on January 31, 2022, with immediate effect.
In the industry's view, through the above series of "big blood changes" for FF management, there will be certain restrictions and constraints on the control rights previously constructed by Jia Yueting. For FF, there is a bigger question to think about in front of it - after Jia Yueting's lies are exposed again, will anyone believe FF?
3. Will anyone still believe in FF?
There is not much capital left in FF itself that can be trusted.
For car companies, the main source of trust from the public and investors is the mass production of products and subsequent sales. Take "Wei Xiaoli" as an example, at the beginning of their establishment, they were not recognized by the market, so that each of them experienced the "darkest hour".
However, with the large-scale delivery of its new energy vehicles, it is gradually accepted and recognized by more consumers, and the most obvious performance is the growth of sales. Looking at the sales volume of the whole year last year, the total sales of the three car companies of "Wei Xiaoli" have approached the level of 100,000 vehicles.
Then in January this year, Xiaopeng and Ideal's monthly sales have exceeded 10,000, reaching 12,922 and 12,268 vehicles respectively, although Weilai did not achieve a breakthrough of 10,000, but the sales volume was close to 10,000 vehicles, reaching 9652 vehicles.
In addition to sales, the growth of stock price and market value also reflects the trust of the capital market in "Wei Xiaoli". As of the close of trading on February 8, the share prices of NIO, Xiaopeng and Ideal were $24.69 per share, $37.17 per share and $29 per share, respectively, with market capitalizations of $39.27 billion, $31.83 billion and $29.47 billion, respectively.
If you compare this stock price and market value with the "Wei Xiaoli" when it was listed in the US stock market, there is a significant increase. Nio, Xiaopeng and Ideal U.S. stocks closed at the close of trading at $6.6 per share, $21.22 per share and $16.46 per share, respectively; in terms of market capitalization, the market value of "Wei Xiaoli" on the day of listing was $6.2 billion, $15.59 billion and $9.724 billion, respectively.
The changes in the stock prices of Weilai, Xiaopeng Automobile and Ideal Automobile are derived from Tiger Securities, and the mapping of wired travel is provided
On the other hand, since the release of FF 91 at the CES show in Las Vegas in January 2017, FF has repeatedly promised mass production and listing time, and has also experienced mass production and listing "skipping tickets" many times. Wired Travel has described it in detail in the article "Jia Yueting has "painted cakes" for investors again".
For the mass production and listing of FF 91, FF related executives are still making commitments.
In January this year, FF released a weibo saying that FF 91 will be officially mass-produced this summer, and according to the plan, the mass production version of FF 91 should be officially rolled off the production line in July. Previously, Bi Fukang also revealed the same news in public.
However, in the eyes of the industry, it is not easy for FF to complete this goal. Although FF has not yet handed over its first financial report after listing, at an investor call in December last year, FF officials said that in the three months ending September 30, 2021, it expected the loss to increase to about $143 million and the net loss to about $280 million.
In addition, FF officials also said that as of September 30, 2021, the company is expected to have a cumulative loss of about $2.8 billion, and it is expected to continue to generate significant operating losses in the foreseeable future, and will achieve profitability and positive cash flow in about 2024.
According to FF statistics, as of September 30, 2021, its cash and cash equivalents are about $667 million, and these remaining funds can guarantee that FF 91 will be listed in July this year. However, FF also expects total liabilities of approximately $354 million as of September 30, 2021.
FF 91, image source FaradayFuture official micro
Coupled with labor costs, rising prices of raw materials such as batteries and chips, and other macroeconomic challenges such as tariffs and supply chain constraints, the FF 91 project will add some costs. To offset the debt and increased costs, FF's capital reserves may not be much.
FF also estimates that about $1.5 billion will be needed to develop the FF 81 and FF 71 models.
In addition to the lack of money, in order to achieve the global large-scale delivery of FF 91, the Chinese market is also a market that FF cannot lose.
At the end of November last year, the relevant person in charge of FF said in response to a question about the postponement of the company's financial report that in addition to making every effort to achieve FF 91 mass production, the company was also negotiating matters related to the landing of the Chinese headquarters. It is understood that at that time, the target cities of FF included Beijing, Shanghai, Guangzhou, Shenzhen and so on.
But a few months have passed, and there is no news of the landing of FF's China headquarters. In the industry's view, perhaps because FF has previously been questioned by short-selling institutions, coupled with Jia Yueting's own credit in China, there may be little possibility of building a factory in China.
"For the capital market, the current attitude towards FF and Jia Yueting, in addition to being cautious, is more of a consideration for whether FF is a target worth investing in, because there are already many car-making projects in front of investors at this stage, and if you want to invest, you will definitely choose a project that is simpler than FF experience, seems to be less risky, or the strength of the partner." Zhang Junyi, managing partner of Oliver Yvrex Consulting, said this to Wired Travel.
The trust crisis of FF is already serious, and the capital market is also voting with its feet.
As of the close of trading on February 8, FF's stock price was $4.24 per share, with a market capitalization of $1.375 billion. Compared with the opening price of 16.8 US dollars per share on the day of FF's listing in July last year, it has fallen by 74.76%; in terms of market value, it has shrunk by more than 4 billion US dollars compared with 5.4 billion US dollars on the day of listing.
FF stock price, screenshot from tiger securities APP
And this distrust has now intensified.
Xia Jinyan, a lawyer at Zhejiang Zeding Law Firm, told Wired Travel that since FF is a U.S.-listed company, it is subject to local laws. Failure to truthfully disclose information or data fraud like FF will harm the rights and interests of shareholders and may violate local laws and administrative regulations in the United States.
Because of this, according to a number of media reports, just after the FF Independent Special Investigation Committee released the investigation report, Pomerantz Law Firm, which had initiated a class action lawsuit for Luckin stock investors, announced that it would investigate claims on behalf of FF's investors. Previously, a number of law firms have filed class actions against FF.
With the fact that FF 's "self-exposed" order data this month is suspected of being fraudulent and Jia Yueting has not left the control of FF, Zhang Xiang, a researcher at the Automotive Industry Innovation Research Center of North China University of Technology, believes that the trust of the domestic market and investors in FF will be further reduced, and FF will also be more strictly scrutinized.
Although this is the case, the road of FF car manufacturing still has to go on, because only by really building and selling cars can we win back the trust of some public and the industry. Only in this way can Jia Yueting's "car-making dream" not "suffocate" at this point.
(The header image of this article is from the official micro of FaradayFuture.) ）