After years of trouble trying to bring its first electric vehicle to market, Faraday Future (FF) is still surviving as it announces a new $225 million bridge loan, but a bridge to where?
Ever since it came out of stealth mode, FF has been involved in controversy.
First, it was lawsuits from vendors. Later, it was executives departing and its CEO and founder, Jia Yueting, seeing his fortune wiped out in China.
FF would often find itself with low funds despite having raised hundreds of millions of dollars.
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 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 more people leaving the startup throughout the fourth quarter.
Earlier this year, Faraday Future finally announced that it settled the dispute with the investor, but it looked like it was too late. Most of its top executives had already left at that point, along with many key engineers.
But the company announced this week that it is back on track after securing $225 million bridge financing, mainly to pay back what it owes to its suppliers:
“Working alongside its new financial partner, Birch Lake Associates, LLC, a boutique merchant bank that invests intellectual and financial capital in undervalued high-potential companies, FF has created a multiple-stream bridge financing program to support the company pending completion of its announced equity-raising program. The up to $225 million bridge financing facility announced today consists of a senior secured financing of $75 million and a vendor trust of up to $150 million. The secured vendor trust program of up to $150 million has been created with Birch Lake’s support to provide greater confidence to FF’s key suppliers and obtain their commitments to support the scheduled production launch of FF 91. As part of the vendor program, Birch Lake has also provided financing to FF for the company to pay all past due amounts for approximately 60 percent of FF’s vendor base, including smaller vendors who are owed less than $20,000. FF’s larger suppliers and vendors have the opportunity to benefit in the vendor trust program by exchanging unsecured trade claims for trust interests that will hold a secured claim equal to all vendor claims in the trust and will include a repayment schedule to be completed during 2019.”
They claim that this bridge financing is going to enable them to complete an important capital raise by the end of the year, which in turn will enable them to bring to market their FF91 vehicles and a new “mass market” FF81 electric vehicle by 2021.
At this point, I’ve lost all faith in Faraday Future. I’ve defended them quite a few times when they were being ridiculed because I thought they had developed some pretty cool EV technology and they had some undeniable talent amongst their ranks.
But now a few years later, almost all that talent is gone and that technology is rapidly becoming outdated as other companies actually bring new products to market.
I’ve lost all confidence in FF delivering any kind of decent product to market at this point. I’ve heard too many terrible stories from former employees who described a complete lack of vision and execution from YT.
In my opinion, that bridge loan is extremely risky and even if it leads to another capital raise, I doubt it will lead to much.
FF did make a deal for a Chinese company to use its IP to build vehicles in China as part of a joint-venture. I think that’s the extent of what will come out of Faraday Future.
What do you think? Let us know in the comment section below.
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