Beijing, January 29 (by Wang Xiaoxiao)
Faraday’s future financing news is finally settled. On January 28, FF and property solutions acquisition Corp (PSAC) announced that they have reached a final agreement on business merger and will be listed on NASDAQ through special purpose acquisition (SPAC). After the merger, the company’s estimated value is US $3.4 billion and the stock code is “ffie”.
The new company will raise $1 billion from the merger, and there will be sufficient funds to support the mass production of FF 91 and the development and delivery of subsequent models. FF is expected to sell more than 400000 vehicles in the next five years, and its first flagship model FF 91 has received more than 14000 orders.
FF also announced that the common equity pipe in this financing includes more than 30 parent institutional shareholders from the United States, Europe and China, and the cornerstone investors of pipe include large financial institutions from the United States and Europe, China’s top three private automobile engine plants and China’s first tier cities.
FF also synchronized relevant information on its official website, and attached a listing financing roadshow document and a shorthand document of this cooperation conference call.
In the morning of January 29, Geely officially announced that it had reached cooperation with FF and participated in FF’s listing investment, but did not disclose the specific amount of investment, which was only a “small amount of investment”. Geely also said the two sides plan to cooperate in the fields of technical support and engineering services, and explore the possibility of OEM services provided by a joint venture between Geely and Foxconn.
2000 mu industrial land supported by local government
According to the roadshow documents, FF, Geely holdings and a first tier city in China may set up a joint venture to support FF’s production plan in China and the construction of FF’s headquarters in China.
In the investment framework listed by FF, Geely will provide support in terms of market and capacity improvement. FF is to provide brand and intellectual property. As for this “first tier city”, FF only makes a rough mark on the map. The document points out that the city will provide about 2000 mu of industrial land to be owned and used by the joint venture company. In addition, it will provide subsidies including tax incentives, and provide additional subsidies for the construction of R & D centers. Combined with the recent report of Zhuhai’s state-owned assets administration of 2 billion yuan, it is not difficult to see that the first tier city is Zhuhai.
Analysts believe that Zhuhai state-owned assets investment is in line with the current Zhuhai state-owned assets investment strategy and the reform layout of the whole Dawan District, which also gives investors confidence to get on the train. The most important impact of Zhuhai’s state-owned assets into the bureau is to introduce FF into the local, and plan to establish innovative and new energy industry cluster around it. At the moment when local governments are scrambling for the smart electric vehicle track, Zhuhai also hopes to use the full format of FF to realize lane changing overtaking.
The original shareholder holds the control right
The merger will provide FF with about $1 billion, including $230 million in cash held in trust by PSAC (assuming non Redemption) and fully committed common share pipe oversubscribed at $10.00 per share (US $775 million). The merger is expected to be completed in the second quarter of 2021.
The $175 million (about 1.13 billion yuan) in pipe comes from a first tier city in China and needs regulatory approval, according to the document. Geely will also participate in pipe with less than 10% of the size of the deal. However, FF said that as of the disclosure of the document, it has not signed any confirmation document on the joint venture, which can not ensure the establishment of joint venture with China’s first tier cities or Geely, or other interest groups in China. There is no guarantee that FF will establish joint ventures in China or elsewhere.
The document also mentioned that after the completion of the transaction, there will be a total of nine members on the board of directors, and the company’s management will appoint two directors and nominate four independent directors through FF top Holdings Ltd. Jordan Vogel of PSAC and Philip kassin of RMG will serve on the board. In addition, FF CEO Bi Fukang will also serve as a director.
In terms of equity structure after the transaction, FF’s original shareholders and creditors (through debt to equity swap) will continue to hold most of the equity of the company after the transaction, accounting for 68.3% (51.1% of the original shareholders and 17.2% of the original creditors through debt to equity swap). In addition, pipe investors such as Zhuhai SASAC and Geely hold 23% of the shares, and the remaining 8.7% of the shares are held by shareholders of PSAC yes.
Affected by the good news, the stock price of PSAC, which was listed on the NASDAQ Exchange, rose nearly 20% on the same day, and its market value has reached US $456 million.
China will become the main battlefield of production
It is mentioned in the document that FF has established good cooperative relations with world-class suppliers in North America, Europe and Asia. At present, more than 94% of key components have been purchased.
In terms of technology, FF said that FF 91 has broken through most of the R & D obstacles and is expected to be put into production by the end of this year. The first batch of vehicles are planned to be delivered in Q1 in 2022. At present, FF 91 has received more than 14000 orders.
In addition, FF said that the product definition of the second model FF 81 has been completed, and the research and development work is also actively promoted. In the next five years, FF’s B2C passenger car planning will include FF 91 series, FF 81 series and FF 71 series. FF 81 is expected to be launched in mass production in 2023, and FF 71 is expected to be launched in mass production at the end of 2024. In addition to passenger cars, FF plans to launch the last mile intelligent transport vehicle (slmd) in 2023 using its proprietary VPA platform.
FF said it will adopt a global manufacturing layout and a hybrid manufacturing strategy of light assets, including its manufacturing plant in Hanford, California, and its OEM cooperation with a South Korean partner in manufacturing. FF is also looking for OEM production in China through joint venture (that is, cooperation with Geely).
It is reported that FF plans to put its main mass production capacity in China in the future. At present, it has drafted a plan for FF, Geely holdings and a first tier city to establish a joint venture to set up FF China headquarters and production base. In the future, it is planned to achieve an annual output of 100000-250000 units from 2025, and to increase another 150000 units by 2026.
The document also mentioned that FF plans to open stores (including self owned and partnership stores) in the top 20 cities of the world’s three major markets by 2025. At present, FF has signed agreements with sales partners such as jolta of the United States and harmony automobile group of China.
In addition, in order to provide a high level of after-sales service, FF has also entered into cooperation with Formel D, the world’s leading after-sales service provider. Bifukang said in the conference call that he hoped the two sides could create a concept similar to Tesla’s “mobile service”.
Profit in 2024
FF believes that the electric passenger vehicle market in China, the United States and Europe will rise in the next 10 years, and it is also very optimistic about its business expectations.
Bi Fukang mentioned in his speech that FF’s five-year revenue and sales forecast shows that FF will occupy 3% of the market share in China, the United States and Europe. He said that this assumption can be realized and is likely to exceed expectations. FF’s variable platform architecture creates cost-effectiveness. In addition, FF will benefit from scale, procurement strategy and design cost. The company expects FF to be profitable by 2024.
Electric vehicle sales forecast
FF revenue forecast
FF also listed in detail the total amount of investment needed for the first electric vehicle from the completion of financing to marketing, which is about $377 million, including 49 million for engineering and testing, 97 million for inspection, 96 million for supply chain and management, and 103 million for capital investment.
At the end of the paper, the current risk factors are listed at a large length. FF said that under the current business model, its operation history is limited, the company’s growth is facing major obstacles, and it is expected that it will continue to lose money in the future, or it may never be able to achieve or maintain profitability. FF said it found five major defects in the “internal control” of financial reporting, but did not disclose them in detail.
For FF 91, which is about to be mass produced, FF said, “in the foreseeable future, we will rely on the revenue generated by a limited number of models”, and “the development of the super luxury electric vehicle market may not meet our expectations, or even not at all.”. FF also mentioned the high dependence on suppliers and a generation factory in South Korea (responsible for the production and manufacturing of some vehicles).
In addition, Jia Yueting’s reputation is also listed as a relevant “risk factor”. “Our founder Jia Yueting has a close relationship with Faraday’s future image and brand,” the document said. The situation affecting Mr. Jia’s reputation, investors’ and public’s understanding of his role and influence may affect Faraday’s future brand and business capability. In particular, in 2020, Mr. Jia was identified by Shenzhen Stock Exchange of China as unsuitable for the post of director, supervisor or senior manager of China’s listed companies. When Mr. Jia completed the bankruptcy reorganization plan in June 2020, he was still on China’s “Lao Lai blacklist”. Although this has no direct connection with FF, it can not ensure how this negative publicity will affect the company’s business, prospects, brand, financial status and operating performance. “