Following a significant fallout with its main investors, Faraday Future is running out of cash and it is on the brink of bankruptcy.
The startup now says that it can’t pay employees and it is putting more of them on furlough.
It seemed like the startup was finally out of the woods after a large Chinese holding company promised a massive $2 billion investment in Faraday Future, but the relationship has proven to be extremely difficult.
The Chinese holding company, Evergrande, agreed to take a 45% stake in the company for $2 billion in funding starting with “initial payments totaling $800m payment through early 2018, and the remaining $1.2 billion over time.”
According to FF, the firm failed to make the additional payments and “tried to take control of the startup.”
They have reportedly been trying to prevent FF from seeking funding from other investors – leaving them without funds.
This has triggered layoffs, furloughs and people leaving since October, but now the company is saying that the hardship has intensified.
Yesterday, FF gave an update on what it called a “financial crisis”:
“FF’s recent financial crisis was brought about by investors Evergrande Health refusing to make its scheduled payments. The investor has further breached its contractual obligations to FF and refused to release its liens over FF’s assets as it was required to do. This has resulted in making it more difficult for FF to achieve short-term financing through asset-backed loans resulting in the current temporary cash flow difficulties. This action has unequivocally harmed FF employees worldwide, our suppliers, our partners, and all of our reservation holders.
We are filing the new emergency relief application on the main arbitral tribunal soon. Since the ruling may be delayed by two to three months, FF will continue to experience a negative impact on our deal with the current financial situation which includes putting additional employees on furlough beginning this week. We are grateful to all of the one thousand global employees, especially the hundreds of employees in the US who are willing to stay and continue to work on the FF91 production and delivery as well as those who will be on a temporary furlough.
This was an extremely tough decision to make, and we recognize the emotional stress and financial strain this puts on people’s personal lives. In addition, we take our relationships with our suppliers seriously, and we hope to receive support and understanding from our global partners as FF overcomes our difficulties.
The FF executive team is receiving interest from investors from around the world who see strong value in FF’s seasoned tech and automotive management. We will continue to push forward on the delivery of the hyper-performance FF91 luxury vehicle and secure our medium- and long-term strategies. We hope to sold the funding issue in 2-3 months.”
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