Faraday Future may struggle to survive after an arbitrator in Hong Kong ruled against a motion from the electric automaker to loosen the stranglehold that Chinese conglomerate Evergrande has on its intellectual property and assets.
The startup requested relief from the arbitrator in the hope that it would allow it to secure investment from new outside sources. While the company’s request to seek $500 million in outside funding has been granted, Evergrande’s stranglehold remains unchanged, The Verge reports.
Chinese real estate giant Evergrande saved Faraday from bankruptcy at the start of the year by pledging $2 billion in investment. The first $800 million of this was to be delivered up front, while the remaining $1.2 billion would be dispersed throughout 2019 and 2020. In return for its investment, Evergrande received a 45 per cent stake in Faraday Future, with the automaker also offering up its intellectual property and many hard assets as collateral.
Evergrande claimed a few months ago that Faraday Future chief executive Jia Yueting spent $800 million by July and requested an advance on $700 million of the remaining $1.2 billion. Evergrande was willing to hand over more cash, but only if Jia stepped down from his director roles at companies associated with Faraday while also turning over this controlling shares to a third party. Jia allegedly failed to oblige and the additional $700 million never materialized.
With virtually no money left, the company laid of hundreds of employees and co-founder Nick Sampson resigned in October.
Faraday Future has since claimed that Evergrande is starving it for money to force it into bankruptcy and walk off with the carmaker’s intellectual property and assets.