Faraday Future is no stranger to financial struggles. After a series of unfortunate events, the EV start-up is pushing back the release of its production model, the FF 91. But, recent Faraday Future news suggests it may have found a short-term solution.
Last week, Electrek reported Faraday Future Intelligent Electric Inc. was again delaying its flagship model’s launch. The company stated it needs to raise capital to continue funding operations.
At the same time, the delay comes after a mass executive exodus, including FF’s CFO, CTO, and CEO, leaving within a few years. Since taking over in 2019, CEO Carsten Breitfeld has set the EV start-up on the right path.
Yet the EV market is fast moving, with legacy automakers and explosive new entrants looking to grab their share of the growth. Faraday Future said its flagship model stands apart with a:
Future-forward design that visually sets it apart from anything else on the road
Despite Faraday Future’s claim that the FF 91 was fully funded to launch, the company is backtracking its statement. More recent Faraday Future news sheds light on the situation. In an 8k filing latest week, FF said:
The company is continuing to engage in confidential discussions and negotiations with certain potential investors regarding a potential financing transaction to fund production activities.
Furthermore, Faraday Futures blames supply chain issues for delaying the FF1 EV launch to the third or fourth quarter of this year. And lastly, it added:
The company needs additional cash to commercially launch the FF 91, and is currently seeking to raise capital to fund its operations through December 31, 2022.
The EV start-up appears to have struck a deal with a major investor for a proposed convertible term loan.
Faraday Future news shows term sheet filing with major investor
In an SEC report filed today, the latest Faraday Future news shows it has executed a nonbinding term sheet with several financial investors. The term sheet consists of potential convertible notes with a principal amount of up to $600 million.
The proposal includes a group of investors going by FF Top, who would finance at least $100 million. Other investors are expected to participate, though the amounts are yet to be determined.
Before the agreement expires, investors can convert their principal to common stock. But there will be a lockout period of 180 days.
Although the agreement sounds exciting, it’s still nonbinding, meaning there is no obligation at this point. The final signing is expected for August 8, 2022. Then, the first installment of at least 50% of the Tranche A notes (promissory notes) will be funded within the first 10 business days of closing. After that, the remaining will occur within 20 days.
If the deal closes, Faraday Future plans to use the money for working capital and general purposes.
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Author: Peter Johnson