FF, Which Will Soon Be Listed, Relies On Borrowing: It Has Nearly $600 Million In Debt And Only $1.12 Million In Cash On Its Book

After Xiaomi officially announced the construction of the car, many people thought of Jia Yueting. Because Lei Jun envisioned a full scene intelligent life, LETV had the same vision.

In May 2014, Jia Yueting founded Faraday future (FF). In the same year, Xiaopeng automobile and Weilai were established one after another, and ideal automobile (then called "chehejia") was founded in 2015. On the starting point, FF is actually higher than these three new car makers. However, due to LETV's ecological collapse, FF's development road is very bumpy. Now, Weilai, Xiaopeng automobile and ideal automobile have already launched mass production vehicles and landed in the capital market, with market value of 62 billion US dollars, 29 billion US dollars and 23.1 billion US dollars respectively, while FF is still striving for survival.

In January, FF and property solutions acquisition Corp. (PSAC), a special purpose acquisition company, jointly announced that they had reached a final agreement on business merger. It is reported that the new company after the merger will be renamed Faraday future Inc., and will be listed on the Nasdaq Stock Exchange under the code "ffie".

On April 5, PSAC submitted the registration documents of business merger with FF to the securities and Exchange Commission of the United States, which also means that FF officially opened the way of listing. Affected by the news, PSAC rose by more than 13% before trading on April 6. By the end of the day, PSAC's share price was $13.63/share, up 10.01%, and its market value was $402 million.

In addition, in the documents submitted by PSAC, the financial and some development status of FF in the past two years have also been recorded in detail. It is clear how much money FF lacks in the past seven years.

The accumulated loss was $2.39 billion

According to the document, FF has not received any revenue from the electric vehicle business so far, so FF has been in a state of net expenditure since its establishment. As of December 31, 2020, FF's cumulative loss was $2.39 billion.

In 2019 and 2020, FF's net losses were $142 million and $147 million, respectively. In addition to the continuous operating expenses of R & D, sales and marketing, general and administrative expenses, interest expense is also an important part of FF cost.

Specifically, FF's R & D investment in 2020 is $2.18 million, which is $8.09 million less than that in 2019. This part of the decrease is mainly due to a decrease of $7.8 million in personnel costs. As of April 5, FF has 288 employees worldwide, most of whom are engaged in R & D and related engineering, manufacturing and supply chain work.

In terms of personnel costs related to administrative services, FF's expenditure decreased from $71.16 million in 2019 to $41.07 million in 2020. This is because FF's expenditure on employees' wages, professional services such as compliance and law, rent, and administrative expenses has decreased accordingly.

It can be seen that in terms of operating expenses, salary expenditure is the biggest cost of FF.

Although FF is in short supply, the basic welfare is guaranteed as long as the employees are left behind. For example, Bi Fukang, who will succeed Jia Yueting as the Global CEO of FF in 2019, will have a total income of about $2.73 million in salary, bonus and options in 2020. Although the PSAC document does not mention Jia Yueting's salary, according to his previous bankruptcy reorganization statement, Jia Yueting's salary income is about 350000 US dollars in 2019.

In fact, in terms of the amount of loss, FF has much less loss than Weilai, Xiaopeng and ideal automobile, but the biggest problem of FF is its lack of capital injection. Because of Jia Yueting's complicated debt relationship, FF couldn't find investors for a time. In this case, FF can only meet its operational and capital needs by issuing various types of notes.

As of December 31, 2020, FF's outstanding principal of notes payable and notes payable of related parties were $296 million and $177 million, respectively. As of April 5 of that year, FF's arrears of notes payable had exceeded US $19.16 million. In 2020, FF's interest related expenses alone exceeded $73 million. The accrued interest of related parties and third parties amounted to $78.58 million and $40.2 million, with total liabilities of nearly $600 million.

However, FF's book cash is only US $1.12 million, so before it is officially listed, FF still needs blood transfusion. On March 26, FF raised nearly $100 million of debt financing, which was led by the credit group managed by Ares Management Corporation, and birch lake and other existing lenders also participated in this round of financing.

After the listing of FF, FF shareholders will hold 150 million class A shares and 61.71 million class B shares, which will hold about 66% of the shares. The current PSAC shareholders will hold 9.4% of the new company, while the remaining 24.6% will be held by investors who purchase PSAC common shares through private placement.

After the merger, FF's class A and class B shares have the same voting rights. However, if FF can achieve a weighted average market value of $20 billion at the end of 20 consecutive trading days, class B shares will have 10 shares of voting rights per share, and FF shareholders will have 87.5% of the voting rights.

If the subscription price of pipe per share is $10, the implied equity value of FF merger will reach $3.4 billion. At the same time, the deal could provide FF with $1 billion in capital, including $230 million in cash held by PSAC in trust (assuming no redemption), and an oversubscription of $775 million of fully committed common stock pipe at $10 per share.

Can FF catch up?

For FF, this $1 billion fund is very important, because it will help it complete the landing of ff91, and let the product really enter the market to verify. According to the document, FF plans to launch the ff91 series on the market within 12 months after its launch.

It is reported that ff91 is positioned as a high-end luxury car, and its benchmarking products include Maybach, bentayga, Lamborghini urus, Ferrari purosangue, Mercedes Benz S-class, Porsche taycan and BMW 7-series. According to FF's plan, it plans to launch FF 91 futurist model in Q1 of 2022, with a target price starting from $180000, and then launch FF 91 model in Q4 of 2022 with a price starting from $100000.

In addition to ff91, FF's B2C passenger car planning in the next five years will also include FF 81 series and FF 71 series. Among them, FF 81 is the second model of FF, aiming at the high-end mass market of class D or e. currently, it is in the engineering stage. It is expected to start mass production about 18 months after the launch of ff91, with the target price starting from $59000. The benchmarking models include Tesla Model S, model x, Weilai es8, etc.

FF 71 will be the third model to be launched by FF, and its target market is the mass market of class C or D. however, FF is not expected to start its design and development until 2022, and plans to launch FF 71 futurist configuration by the end of 2024 with sufficient funds. The price of FF 71 futurist will start from US $65000. The benchmark models include Tesla Model 3, model y, BMW 3 series, etc.

In terms of production, FF will adopt global manufacturing layout and asset light hybrid manufacturing strategy. Among them, FF has rented a 1.1 million square foot manufacturing plant in Hanford, California. The construction and renovation of the factory will be completed within 9 months after FF's launch. There will be a body shop, a paint shop, and a parts manufacturing assembly line. It is estimated that the annual production capacity of FF is about 10000 vehicles.

In addition, FF has signed a memorandum of understanding with Myoung shin, a Korean auto parts manufacturer. It is estimated that by 2025, the new manufacturing capacity will reach 27000 vehicles per year. Finally, FF is exploring the possibility of increasing production capacity through establishing a joint venture in China.

FF management expects that FF's first passenger car will be launched in the United States, soon after that, it will be launched in China, and then expand to Europe in 2023. In terms of sales and delivery, FF plans to adopt the direct sales mode of online and offline combination, while the offline sales network will include FF self operated stores and franchise stores.

For competition, FF also admits that most of the current and potential competitors have greater financial, technical, supply chain, manufacturing, marketing and other resources than FF. They may be able to devote more resources to the design, development, manufacturing, supply chain, sales, marketing, etc. of electric vehicles. In addition, compared with FF, FF's competitors may have greater visibility, longer operating history, lower material costs, larger sales force, broader customer and industry relationships, and other resources.

In this case, FF can place more hope on only some advantages of product performance. As of December 31, 2020, FF has submitted more than 880 patent applications, including about 550 patents worldwide, including about 150 in the United States and 380 in China.

In the past few years, compared with other competitors, FF has been basically in a stagnant state. In the final analysis, it is because a clever woman can't make a meal without rice. Now, FF's funding problem is expected to ease, but the market it faces has already undergone earth shaking changes. In addition to the rising new forces of car making, there are also Internet companies like Xiaomi, Baidu, apple and so on. In such a situation, can FF win back a city by products?

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