Faraday Future Intelligent Electric Inc. announced the company has secured enough funding to go forward with series production of its first consumer automobile, the FF 91 Futurist, and its stock enjoyed a bump as result.
The company’s stock opened sharply higher on the news, peaking at $1.48 on Monday before sliding steadily down into the 80 cents per share range. Faraday shares have been on an upswing through the month of January, rising from a low of $0.27 per share on Jan. 3.
The company’s weekend announcement described financing commitments of $135 million in convertible secured notes, of which $80 million is expected to be funded within 10 business days.
The remaining $55 million is expected to be realized within five business days after the satisfaction or waiver of certain conditions, including receipt of company stockholder approval and an effective registration statement for the shares underlying the applicable notes. The money is coming from ATW Partners and Acuitas Capital and some other unnamed investors.
“Securing $135 million in funding commitments is critical and imperative for Faraday Future’s sprint to FF 91 Futurist’s SOP,” said Xuefeng (XF) Chen, Global CEO of Faraday Future. “The availability of these additional funding commitments provides confidence that FF can reach the SOP milestone in March 2023. We will deliver the FF 91 Futurist with high quality and high product power as soon as possible after receipt of the funds contemplated by these financings.”
A Reuters report from December stated that the company was seeking $150 million to $170 million to begin production of the often delayed FF 91 Futurist. The cash-strapped company has been seeking additional money regularly during the past several years.
Production expected in March
This round of financing will be added to the $33.4 million raised by Faraday since the middle of December to fund production costs for the FF 91. The company expects to start production of a consumer-saleable FF 91 Futurist around the end of March. The cars are expected to drive off the assembly line in early April, with deliveries before the end of April.
Faraday previously delayed production — multiple times — due to a lack of capital. Faraday said it was getting ready to begin production in 2020, but that never happened. Then the company planned to begin production in 2021 with a $1 billion investment, but only unveiled the pre-production model of the FF 91 early in 2022. By mid-year, the company admitted that its much-touted 14,000 pre-orders were in fact only 401 actual orders.
The company needed money again in the summer of 2022, and changed out its top executives amid allegations of mismanagement in September. In November, the company secured $350 million in new funding, and worked to cut its burn rate while getting no closer to actual production. Faraday’s former CEO Carsten Breitfeld was replaced by as Global CEO by the company’s China Chief Executive Xuefeng Chen towards the end of last year.
A special stockholder meeting
Separately, the company plans to hold a special stockholder meeting Feb. 28, to consider a proposal to increase the authorized shares of Faraday Future Class A common stock. This proposal, if approved by Faraday Future stockholders, will dilute the holdings of existing investors, but will also clear a path for additional future financing.
The proposal before the shareholders includes an important modification to a major provision in the original FF secured financing agreements. Faraday currently has an anti-dilution provision that allowed investors to purchase additional shares at the diluted price. That clause has been removed in this proposal. The company says this action will help stockholders avoid a potential future dilutive issuance of up to hundreds of millions of shares.
Faraday Future stockholder approval is one of the conditions required to complete a portion of the current round of funding, and several major shareholders have pledged to support the action. Smaller stockholders may have little choice but to accept the dilution to salvage their prior investments. If the proposal is not approved, the money won’t be there to begin production.
Competing in the luxury market
Faraday’s website does not specify exact pricing for the FF 91, but it’s generally expected to be in the range of $180,000 to $200,000. The company claims the production model of the FF 91 will have, “an industry-leading 1,050 horsepower, an EPA-certified range of 381 miles, 0-60 mph in 2.27 seconds, a unique rear intelligent Internet system, and a revolutionary user experience designed to create a mobile, connected, intelligent, and luxurious third Internet living space and user mobility ecosystem platform.”
The company also says it considers its competition to be Ferrari, Maybach, Rolls Royce, and Bentley. It remains to be seen how many buyers will lay down that kind of money to buy a car from a company operating on such shaky financial ground. However, this funding round is good news for Faraday, and raises hopes that production will prove the value of the company.
