Electric Vehicle Startup Faraday Future in Talks to go Public in a Reverse Merger Deal
This year continues to be big for startups to launch IPO's via deals with special purpose acquisition companies (SPACs) in order to raise capital from investors on Wall Street. The latest company mulling a SPAC deal is financially troubled electric vehicle startup Faraday Future, Reuters reports.
Faraday Future's CEO Carsten Breitfeld confirmed on Monday the company's plans to become a publicly traded company.
"We are working on such a deal ... and will be able to announce something hopefully quite soon," said Breitfeld.
A SPAC is a shell company that raises money through an initial public offering (IPO) to finance a merger or acquisition, typically within a two year time span. It's often used by startups to attract new funding on the stock market.
SPAC's help companies deal with the lengthy and difficult process of launching an IPO in the U.S. Rather than dealing with all of the paperwork, roadshows and attracting investor interest for an IPO, companies such as Faraday Future can instead merge with another company that's already public.
The funds are held escrow until a combination transaction closes. However, if no acquisition is made within 24 months, the SPAC is dissolved and funds are returned to investors.
Some of the other companies that have or plan to enter into SPAC deals this year include online auto retailer Shift, hydrogen fuel cell truck startup Nikola Motor, electric truck startup Lordstown Motors and lidar developer Velodyne.
Breitfeld declined to say who Faraday Future is negotiating with or when a deal would close. But Faraday has said in the past it hopes to raise $800 million to $850 million to launch its FF 91 luxury electric vehicle.
Faraday Future's FF91 is a 1,000 hp, luxurious, fully-electric, autonomous-ready vehicle offering high-performance with an intelligent user experience. The state-of-the-art vehicle was designed to compete with the Tesla Model X and Model S. However, the company's financial problems halted its development and the release date was continuously pushed forward.
The interior of the FF91 luxury electric SUV.
Breitfeld, is an auto industry veteran who spent twenty years at BMW. He is best known as the designer of BMW's futuristic i8 electric hybrid car. While at BMW, Breitfeld led the i8 project from concept to production vehicle in just 38 months, and unprecedented speed for the traditionally slow moving auto industry.
After Breitfeld left BMW he co-founded Chinese EV startup Byton, which he called "an intermediate step" in his career path. In April 2019, he left Byton and briefly joined yet another China-based electric vehicle startup Iconiq Motors.
In Sept 2019, Breitfeld took over the reins at Faraday Future.
Breitfeld's experience in developing the BMW i8 from concept to production vehicle was one of the reasons why he was hired to oversee the production of Faraday's flagship FF91, the company's first EV.
We interviewed Brietfeld last year at Automobility LA where he spoke a bit about his role at Faraday Future as its new CEO. He said that Faraday's advanced electric powertrain technology prompted his decision to join the financially strapped company and he saw an opportunity to turn things around at the company.
"When I did the BMW i program, I came in contact with the future of mobility," he said. "I really want to be part of the transformation and become part of a company that shapes the future of transportation."
If successful in launching a U.S. IPO, Breitfeld said Faraday Future would deliver the luxury electric FF 91 SUV nine months after securing funding, with volume production beginning 12 months after.
Faraday originally planned to build its futuristic FF91 at its manufacturing facility in Hanford, California, but ultimately decided to use a contract manufacturer in Asia, which Breitfeld confirmed Faraday has done. He declined to identify the company.
Faraday Future Was Once a Promising EV Startup
Faraday Future was once one of the most promising new electric vehicle startups to emerge after Tesla, but the company ran into financial trouble after the company's billionaire founder and main backer Jia "YT" Yueting filed bankruptcy. The company has burned through $2 billion in cash which disrupted the development of the FF91.
Yueting finalized his personal bankruptcy case in June. However, Breitfeld said Yueting no longer owns stock in Faraday, rather it's half owned by employees through an executive partnership and an employee stock ownership plan. Yueting's stake in the company had been a "major blocking point" to bringing in other investors, he said.
Breitfeld acknowledged Faraday has struggled in the past with executing its business plan. He told us last year that not having a vehicle on the market after five years of work changed the whole perception of the company as just another EV startup that failed to achieve its goals.
"Because of the history and sometimes the bad news of the company, not everyone is really trusting us," he told Reuters. "They want to see that we've become a stable company."
Competition for Faraday is heating up as automakers and startups are following Tesla's lead into the electric vehicle space.
Legacy automakers including Mercedes Benz, Porsche, Audi, Volkswagen, BMW and Ford are introducing their own new fully-electric mass-production models. Joining them are U.S. startups Lucid Motors and electric truck maker Rivian, as well as rising EV startups in China Xpeng Motors and Nio Inc. Xpeng luanched its own U.S. IPO in August.
So if Faraday Future were to successfully launch an IPO and finally build the FF91, the EV market will likely be crowded with competitors.
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