Faraday Future – Sleight of hand

Faraday Future only tells half the story.

• In my opinion, Faraday Future is playing fast and loose with investors by issuing a press release regarding the resolution of a shareholder dispute but failing to mention that its vehicle is now suspended until such time that more money can be raised.
• Fortunately, the market saw through this which caused a rollercoaster ride as the shares shot up 30% only to collapse again once the full contents of Faraday Future’s 8K become more widely known.
• Faraday Future announced in a press release yesterday (see here) stating that it has resolved its dispute with its largest shareholder, dismissed some members of its board and secured $100m in committed funding.
• The $100m is not nearly as good as it sounds as $60m is subject to the due diligence completion and has a funding schedule based on certain milestones while the other $40m is subject to unspecified conditions.
• In practice, this means that $100m is not going to show up tomorrow, but will only materialise as the company executes on its plan.
• The resolution of the dispute where Faraday Future caved to its shareholders and dismissed some of its board members and the funding was enough to send the shares up 30% but this is only half the story.
• Buried at the bottom of the company’s 8K filed with the SEC on 26^th September 2022 (see here) is the real disclosure as the penalties for lying to the SEC are not inconsequential.
• Item 7.01 discloses that as of 21^st September 2022, the company had $33.5m in cash and in the last 4 months of 2022, it expects to burn $293m.
• Taking into account time past and cash on hand, this leaves the company short of $200m in order to keep the lights on until December 31^st.
• This means that at least another $100m is needed on top of that which was announced yesterday to avert, what I consider to be inevitable, bankruptcy.
• In light of this dire state of affairs, the company is no longer expecting to ship its FF91 vehicle in Q3 or Q4 2022 and is unable to say when it will ship.
• Effectively, the company has gone into hibernation until it can raise a lot more money at which point it aims to provide a new timetable for deliveries.
• Given the state of the vehicle (see here), the execrable execution of the management and its almost limitless ability to burn cash, there are no circumstances whatsoever that a prudent, reasonable or rational investor should put money into this company.
• The conditions being placed upon the company by its supportive investors are onerous and I suspect that it will have great difficulty in raising enough money to survive 2022.
• Hence, I continue to think that the FF91 will never ship, that the company will file chapter 7 or 11 by the end of the year and that the shares are worth $0.