Only two months ago, Nevada Gov. Brian Sandoval approved a $335 million incentive package in a deal to secure that Faraday Future will build a $1 billion electric car factory in the state, more specifically in North Las Vegas. Now after the company reportedly broke ground at the site just a few weeks ago, we learn that Nevada Treasurer Dan Schwartz is questioning Faraday’s financial health after inquiries and a visit to China.

It looks like Faraday is subject to its fair share of scrutiny, especially after both Nevada and Tesla were criticized over the size of the incentive package the state agreed to give Tesla to build its Gigafactory near Reno. The package has been widely reported to be worth $1.3 billion and contributed to Tesla’s image as been dependent on government subsidies, but it’s important to understand that the incentives are spread out on 20 years and contingent on Tesla spending close to $100 billion at the factory during the same period.

Although smaller in size, Faraday Future’s deal with the state of Nevada is similar to Tesla’s. The state will give the company $215 million in tax credits and abatements, and publicly finance $120 million in infrastructure improvements at the industrial park in North Las Vegas, where the factory will be built.

Now Nevada State Treasurer Dan Schwartz has concerns over Faraday’s capacity to put up the $1 billion investment it promised the state. Schwartz traveled to China last week to make inquiries about Leshi (or LeTV or LeEco – the co goes by many different brands) and its billionaire backer Jia Yueting who is financing Faraday’s effort in the US.

He talked about his trip with the LA Business Journal:

“I spoke with several members of the Chinese corporate and financial communities who are familiar with and know Leshi and Mr. Jia. What they all agreed on is he doesn’t have the money. If I were to sum it up: It’s the emperor’s new clothes. If you look at the financials, (Jia) isn’t making any money. He certainly isn’t making any money to fund a billion-dollar car facility.”

To be fair, just like Elon Musk is not personally financing the Gigafactory, no one is expecting Jia to personally have the money to finance the project. A large portion of his wealth is tied up in shares of Leshi, which is often referred to as the “Netflix of China”.

But what prompt Schwartz to look into the finance of Jia is that the trading of Leshi’s stock on China’s market stopped on December 4 reportedly to transfer a controlling stake of one of the company’s subsidiary. Trading was supposed to resume by January 5, but has of today it remains halted. Before the trading was halted, the company reported ~$16.8 billion market cap.

The last available financial reports show that Leshi had a net income of $56 million on revenue of $1.05 billion in 2014, while it had $392 million in long-term debt and $550 million in cash and equivalents on its balance sheet.

Financial analyst Aarin Yu looked into Leshi’s finances for the Business Journal  and he doesn’t think the company has any financial problems. He said that Leshi could “probably take on a huge amount of loans” to finance the project, but at a high interest rate.

The treasurer is now seeking $70 million from Faraday to securitized the state’s obligation bonds and financing of the infrastructure investment. Schwartz is reportedly going to meet with Faraday this week to discuss the issue.

Our recent coverage on Faraday Future:

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