Faraday Future targets IPO with shell company
Faraday Future is aiming to go public. Although the electric car startup announced this step about a year ago, with the announcement of its new strategy, Faraday Future now seems to be taking concrete steps.
As CEO Carsten Breitfeld explained to Reuters, Faraday Future will follow several other electric vehicle manufacturers in the strategy to go public through merging with an investment company. “We are working on such a deal and will hopefully be able to announce something soon,” said Breitfeld. He declined to give further information about the possible partner or a more precise time frame for a deal.
Instead, Breitfeld became a little more specific about Faraday’s timetable for series production, which should be around nine months after the financing. This is when the first FF 91 is to be delivered, and three months after that, the start-up wants to produce larger quantities. When Faraday Future announced the company’s new strategy in September 2019, they estimated the financial requirements to launch the FF 91 at 800 to 850 million dollars (680 to 720 million euros).
Breitfeld said that the e-SUV that debuted in 2017 will be built by Faraday Future itself in Hanford, California, after which a contract manufacturer in Asia will be responsible for production. An agreement for this has already been signed, but the Faraday CEO did not name any names of the production partner either.
It is clear that company founder Jia Yueting will no longer play a role at Faraday Future in the company’s new plans. According to Breifeld, Jia no longer owns any shares and more than half of the company is owned by the employees through an employee share ownership plan. According to Breitfeld, Jia’s earlier shareholding blocked the recruitment of new investors. Under Jia, Faraday had burned more than two billion dollars. “Because of the history and sometimes the bad news of the company, not everyone is really trusting us,” Breitfeld now told Reuters. “They want to see that we’ve become a stable company.”
Since Breitfeld took over there has been a marked reduction in negative headlines and financial problems. Breitfeld joined Faraday Future at a time when the company found itself in dire financial straits. Before joining Faraday, Breitfeld was one of the co-founders of Byton and former project manager for the development of the BMW i8 PHEV.
The strategy of going public via a merger with an already listed investment company has been more common lately in the electric mobility industry. Nikola Motor, a prospective e-truck manufacturer who has since come under criticism from investors, had joined forces with VectoIQ for the IPO. In August, Lordstown Motors (with DiamondPeak Holdings) and Canoo (with Hennessy Capital) announced similar deals. The US charging provider ChargePoint also wants to go public through a merger with Switchback Energy, and the solid battery specialist and Volkswagen partner QuantumScape has entered into a similar agreement with Kensington Capital.
The investment companies were usually founded precisely for this purpose and are therefore also known as “special-purchase acquisition companies” (SPAC). In the event of a merger, such a SPAC deal can greatly accelerate the usual procedures of a separate IPO, as SPAC are already listed on the stock exchange. The recent interest in this strategy is also driven by the popularity of auto technology startups among investors looking for the kind of high stock valuation seen with Tesla Inc.