Less than 3 months after the listing, Faraday Future was shorted

On October 7, the US short-selling agency J Capital Research (Meiqijin Investment) released a 28-page short report on Faraday's future on its official website, elaborating on many aspects of the financial difficulties, production capacity, Faraday Future founder Jia Yueting himself, and bluntly said: "Faraday Future will never sell a car." ”

Half a day after the report was released, Jia Yueting hit back with "cold rice, hot stir-frying, nonsense", and he also said that J Capital Research was not the first time it was "punched in the face", "July 2022, Hanford, California, the birth of a new species is coming." ”

Accused of "multiple crimes" such as financial crisis

It is understood that since its establishment in California in 2014, Faraday Future has planned to build factories in 6 locations in China and the United States, of which 3 factories in China are located in Deqing, Zhejiang, Zhuhai and Guangzhou, Guangdong, and 3 factories in the United States are in North Las Vegas in Nevada, Vallejo and Hanford in California. The report pointed out that as of now, none of the above factories have been fully built, and although the Hanford plant is currently the only car production plant in Faraday Future, three surveys of the plant by J Capital Research in August and September this year found that the factory was unusually quiet and there was almost no action. In addition, only 11 jobs at the Hanford plant are posted on Faraday Future's official website. In this regard, on October 15, Faraday Future said that it has started the construction of the Hanford plant and completed the installation of property insurance and supplier support to support the production of quasi-production vehicles.

At the same time, the report devotes a great deal of space to the financial position of Faraday Future: On July 22 this year, Faraday Future has received nearly $1 billion in financing since its listing on the NASDAQ, including $230 million in asset solution acquisition company (PSAC) trust accounts and $761 million in common stock. But immediately after the transaction closed, the company disclosed that it would pay $144.9 million in cash and 25.9 million shares to various creditors, and up to $92.3 million to cover "consulting" fees, including banking, printing, legal and accounting services.

According to the data, Faraday Future's net loss in 2019 was $142 million, and the net loss in 2020 was $147 million. According to documents disclosed by Faraday Future, the company needs an additional $1.4 billion in cash to achieve its financial targets by 2024, which may lead to further dilution of investors' equity after large-scale financing and debt-to-equity swaps, and J Capital Research questions whether anyone will be willing to continue lending to Faraday Future. In addition, earlier this year, Faraday Future claimed to have received a deposit for 140,000 cars, but the report noted that 78% of the orders came from the same private company, and that the deposit was paid by the private company through an annualized 8% note payable.

In addition, the report pointed out that FF 91 related technologies are not ready and difficult to put into production. According to the report, a former Faraday Future executive said: "If I were to buy a car like this, it is estimated that the battery pack would be recalled in 18-20 months because of the leakage problem in the battery pack." The report also believes that after the production of FF 91, there will be problems with durability and difficulty in obtaining supplier parts stably.

Mass production of the FF 91 has been postponed several times

Regarding the FF 91 mass production time that the outside world is concerned about, Faraday Future Global CEO Bi Fukang recently said: "We have sufficient confidence to deliver the FF 91 Futurist on time and with high quality and high product strength within 12 months after the listing. It is reported that the FF 91 is Faraday's first model in the future, and the concept car was first unveiled at the 2017 Global Consumer Electronics Show (CES) in Las Vegas, USA. In fact, as early as 2018, Faraday Future said that FF 91 will be delivered at the end of the year; by 2019, Faraday Future said that it is only "one step away" from mass production; by 2020, the expression has become "a foot in the door"... Until now, FF 91 has not been mass-produced, and Faraday Future has therefore been put on the hat of "PPT car".

Faraday Future announced that the FF 91 was opened for booking on the day of its listing, and 4 days later, Faraday Future's official website showed that the global limited edition of 300 units of FF 91 "Futurist Alliance Edition" has been sold out. In addition to FF 91, Faraday's future passenger car plans for the next 5 years include FF 81 and FF 71.

On the day of the listing, Jia Yueting was full of confidence in the future of FF 91, and said that FF 91 is currently the only mass production car in the world with higher product and technical positioning than Tesla Model S. "The FF listing is a new starting point, solving the problem of funds, and will go all out to achieve 12 months of mass production and delivery." For the debt problem that the public is concerned about, Jia Yueting responded: "I will completely solve it." ”

A compulsory course for first-line car manufacturers

On the first trading day after the short report was published, Faraday Future's stock price fell at the opening, but at present, it seems that the report did not cause a long-term suppression of Faraday's stock price, and the stock price rose immediately after the short-term decline.

J Capital Research is an established professional investment consulting firm that has shorted a number of Chinese companies such as JD.com, Uxin, and BeiGene, and indeed has "had several 'punched in the face' experiences" as Jia Yueting put it. It is worth noting that some institutions in the United States will take advantage of the opportunity to lower the stock price and make profits by issuing short reports. Although J Capital Research said that the sources of the report include field research visits, company financial report data and public information, the reporter noted that the report is rhetorically motivating and some of the text is more oriented. Faraday Future said that J Capital Research's report is full of misleading information, lacks logic and factual basis, and Faraday Future will reserve the right to legally prosecute such irresponsible allegations.

It is understood that Faraday Future was also recently sued by Beijing Yingda Capital Management Co., Ltd., a wholly-owned subsidiary of State Grid, and law firm Bernstein Litowitz Berger & Grossmann LLP will launch an investigation into whether Faraday Future has violated US federal securities laws, focusing on whether Faraday Future disclosed misleading information to investors about its ability to produce electric vehicles. It is also reported that at present, Jia Yueting himself has been involved in 96 litigation cases, involving an amount of more than 6.4 billion yuan.

In fact, Tesla, Weilai and other new car manufacturers have been shorted by relevant institutions, but they have entered the ranks of first-line car manufacturers after their development in recent years. Industry insiders believe that for Faraday Future, if it can deliver the new car on time and get out of the financial predicament, it is the most powerful response to various doubts, otherwise it will not be able to get rid of the suspicion of "PPT car".

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