Faraday Future’s best shot at redemption may be a SPAC
Despite a whirlwind of electric vehicle SPAC mergers in the last few months, there’s still one startup flying solo that’s arguably the best-positioned. Yes, Faraday Future is still on the market — though maybe not for long.
Sure, Faraday Future is distressed and its electric SUV is outrageous, but it developed valid technology over the last few years that is further along than what some competitors have. It will take a lot of money to get that vehicle over the proverbial finish line. Lucky for Faraday Future, though, money is now incredibly easy to come by.
In the last seven months alone, a half-dozen startups have gone public or announced plans to go public by merging with SPACs, or special-purpose acquisition companies — publicly traded investment funds that only exist to acquire other companies. Faraday Future has said since October that it’s looking to go public by merging with a SPAC, and Bloomberg reported on January 10th that the startup is in talks with one run by a New York City real estate investor. Faraday Future also hired its first chief financial officer in three years, in a potential nod to there finally being some serious work to do.
If Faraday Future doesn’t pull off a SPAC merger, it won’t be for lack of trying. The startup has entertained investors looking to take companies public since the beginning of the SPAC boom last June.
One group toured Faraday Future’s idle factory in Hanford, California, on June 26th, according to emails obtained by The Verge. That group then immediately departed from the local airport for Jackson, Wyoming, according to the emails and flight records. The Jackson area is home to investor Daniel Hennessy’s SPAC, which eventually merged with rival startup Canoo. Faraday Future brought another unidentified investor group through the factory in September, The Verge has learned. (Emails to Nicholas Petruska, the chief financial officer of Hennessy’s SPAC, were not returned. Faraday Future did not immediately respond to a request for comment.)
But now there’s a CFO in place, and negotiations are reportedly happening. Yes, Faraday Future has lost most of the people who worked on its electric SUV, the FF91. And yes, it has burned through $2 billion to date. But this is the best chance the startup has had to bring in outside help since a deal with a Chinese conglomerate Evergrande fell apart in spectacular fashion at the end of 2018.
It may be hard to believe Faraday Future could go public considering the troubles it’s had over the last four years — which The Verge has documented extensively. But it’s also kind of easy to believe the company will make that leap given the momentum these mergers have created.
That movement — sparked by Tesla’s success in 2020 but supercharged by the rise of retail traders who trade stocks on Robinhood and speculate on Reddit — has already turned startups on the brink into companies with valuations of a billion dollars or more, despite many of them not making any money yet. And some of those that weren’t headed for collapse are still going public with unproven technology.
You’d be hard-pressed to find a company more on the brink than Faraday Future. As for the tech, Faraday Future’s battery pack, motors, and inverter were all designed by the widely respected team that created the General Motors EV-1, the first attempted mass-market electric car. The company has said its SUV is essentially 85 percent complete, meaning it’s ahead of peers like Fisker and Lordstown Motors, which have only recently started testing their first prototypes.
If there is a knock on the technology Faraday Future has created since its inception in 2014, it’s that employees were given too much freedom to work since founder Jia Yueting — who is prone to lighting money on fire — set them all toward the goal of creating a vehicle that costs close to $200,000. But the pack and the motor layout are scalable, meaning smaller versions that cost less are possible.
In fact, Faraday Future was one of the first EV companies to design one of these modular so-called “skateboard” platforms, where all the tech that’s crucial to powering an EV is integrated into the base of the car and can fit differently sized vehicles. It’s just never had the chance to execute on the idea.
None of this guarantees Faraday Future will succeed. Selling an extremely expensive SUV that also costs a lot to manufacture will make it hard to turn a profit — even in China, where the startup also wants to operate. By the company’s own admission, it still needs some $850 million just to put the vehicle into production. It has a long way to go to generate revenue.
That may not matter so much to investors who would rather tap the SPAC boom while there’s still money to be made, though. There’s value in Faraday Future’s tech (and the patent portfolio behind it), and business plans can always be adjusted. To wit, the new chairman of Canoo has refocused the company on selling its technology to — and partnering with — other businesses instead of jumping too deep into passenger vehicles. For Faraday Future, like these other companies, merging with a SPAC is the quickest path to fresh funding.
What could still hold Faraday Future back is its most persistent obstacle: Jia himself.
The startup’s new CEO has worked to box in the tycoon founder since taking the helm in 2019, including setting up a management committee that is now in charge of making decisions. This effort was aided by Jia declaring personal bankruptcy to settle some $3 billion in debt he still owes in China. The agreement he ultimately came to was to give each of those creditors a slice of a new trust that holds his controlling shares of Faraday Future, simultaneously offering restitution while also giving up “control” over the company.
But over the years, Jia has filled Faraday Future’s ranks with people loyal to him, many of whom are either former employees of his previous company, tech conglomerate LeEco, or family members. And according to his bankruptcy filings, his nephew still holds veto power over the management committee.
Jia has maintained that he wants to return to China, and a successful public listing that helps make his creditors somewhat whole could help make that happen. After all, he only turned up in the US a few years ago after being named to a debtor blacklist there. Whether the autocratic government would welcome him back, or what would happen when he got there, is hard to say. The recent crackdown on Alibaba’s Jack Ma, a far more visible and successful businessman, doesn’t particularly bode well.
If Faraday Future fails to merge with the real estate SPAC, there are plenty of others eager to dole out cash. A SPAC started by investment fund Churchill Capital is currently in talks with Saudi-backed EV startup Lucid Motors, but previously targeted DirecTV, so it’s playing the field. If Lucid Motors decides to stay private or follow the traditional IPO route, maybe that SPAC will turn its attention to Faraday Future.
Perhaps the most poetic, though, would be one that Reddit and Twitter users have baselessly speculated on: the SPAC created by CITIC Capital, the asset management arm of the massive state-owned investment company CITIC Group. What better way for Jia to make good with the Chinese government than to give it a direct interest in Faraday Future’s success?
Despite a whirlwind of electric vehicle SPAC mergers in the last few months, there’s still one startup flying solo that’s arguably the best-positioned. Yes, Faraday Future is still on the market — though maybe not for long. Sure, Faraday Future is distressed and its electric SUV is outrageous, but it…
