AutoBeta(AutoBeta.net)02/03 Report--

On February 1, local time, the independent director investigation committee of Faraday Future Motor (FF), set up in response to the short selling allegations, released a report, saying that the special committee had completed the previously announced investigation into the short selling allegations. The investigation found that the information released by the company's investors was inconsistent with the facts, and there were some weaknesses in corporate governance and compliance, but There is no evidence of other problems mentioned in the shorting report.

On October 7, 2021, J Capital Research, an American short seller, issued a short selling report, which concluded that FF could not sell a single car through a visit to the factory and some office sites of FF, and an analysis of technical capability and R & D investment. The short seller said that in August and September, there were three visits to FF's Hanford plant in California, but there was no sign of production, and there was no sign of several plants that FF claimed to be under construction. According to FF's listing documents, it needs another $1.4 billion to achieve mass production, but short sellers say no one will provide financing or loans to FF cars. Jia Yueting, FF, responded to the short-selling report: "Hot stir-fried cold rice is nonsense."

In June last year, outsiders learned about the latest development of Letv's car-building story from an upgrade of his mobile app. Letv Video Mobile released the update on June 11, in fact, this version of the update does not include new features, but only changes the APP icon, the icon has an extra line of text "Boss makes car America", and the app store details also has a complete limerick: always the master in the folk, named me optimistic, Luo Pang Shayin plays Zhen Huan, the boss builds American car.

On July 22nd, FF Motor was listed on the NASDAQ of the United States through a special purpose acquisition company (SPAC) under the stock code FFIE. SPAC is to first set up a company, divide the equity ratio of investors, and then achieve listing, and then through mergers and acquisitions after listing, load the theme assets into the listed companies to achieve the purpose of listing. FF Automobile bought a shell and injected assets by way of acquisition, which easily achieved the goal of listing.

When FF went public, the offering price was 13.78 yuan / ADS, opening at 16.8 yuan / ADS, up 22% from the offering price, with a total market capitalization of $5.4 billion. Jia Yueting, founder of FF, said in an interview after listing: "the listing of FF is a new starting point, which solves the biggest funding problem, and then goes all out to achieve mass production and delivery in 12 months." Letv creator Jia Yueting witnessed the listing of FF cars offline. In 2016, he left huge debts in China and then left the United States. He once said on Weibo that he would "return to China next week", which is one of the two hot stalks he left for netizens, while the other is "PPT car building". But with the launch of FF cars, Jia Yueting can also realize his dream of building PPT cars, but FF cars are still in the situation where the company has yet to launch cars on the market. After the listing rang the bell, the reporter asked Jia Yueting if he had any plans to return home. Jia Yueting replied, "that's necessary."

On November 29th, Faraday received a warning letter from Nasdaq that FF, a listed company, had not submitted its first third-quarter results after its listing, and Nasdaq warned it that it could face delisting if it did not do so within the 180-day grace period. FF replied that because of allegations of short selling, the independent directors were appointing an investigative committee to conduct an independent investigation into the short report and therefore did not mention the financial report in time. To this day, FF has not yet released its financial results in accordance with the requirements of the exchange, but the independent investigation committee has released an investigation report on the content of self-examination.

After review, the Special Committee yesterday released the following conclusions of the final investigation:

1. With regard to the business merger between FF and PSAC in July 2021, the statements made by some company employees to describe Jia Yueting's role in the company to some investors are inaccurate. Jia Yueting's participation in the management of the company after the merger is more important than that represented by some investors.

2. FF said in a statement before the business merger that it had received more than 14000 bookings for FF 91 vehicles, which may be misleading because only a few hundred bookings have been paid, while the rest (a total of 14000) are unpaid.

3. Consistent with FF's previous public disclosure of major defects found in its internal controls, FF's internal controls on financial accounting and reporting need to upgrade personnel and systems.

4. FF's corporate culture does not pay enough attention to compliance.

These are not the final findings, FF said, under the guidance of the executive chairman, the company will continue to investigate and remedial work, including whether the company housing arrangements and related party disclosure of inaccurate disclosure.

In response to the existing findings, the Special Committee made a number of recommendations for corrective measures, which were approved by the FF Board of Directors on January 31st, 2022. The details are as follows:

1. Appoint Susan Swenson, the sole member of the board of directors, as the executive chairman of the board of directors. In view of the role of Susan Swenson as Executive Chairman, she will withdraw from the Board's Audit and Remuneration Committee.

2. Carsten Breitfield, CEO and Jia Yueting, founder and chief product and user ecosystem officer, will report directly to Susan Swenson, and their annual base salaries will be cut by 25 per cent.

3. Appoint Jordan Vogel as the chief independent director.

4. Under the new leadership structure, Brian Krolicki will step down as Chairman of the Board and Chairman of the Corporate Governance and nominating Committee and become a member of the Audit and Remuneration Committee of the Board, while Jordan Vogel will step down as the Corporate Governance and nominating Committee.

5. Scott Vogel will be chairman of the audit committee, corporate governance and nomination committee of the board of directors.

Wang Jiawei, vice president of global capital markets at FF, was suspended.

In addition to implementing the above remedial measures to strengthen supervision and corporate governance, FF will also take the following measures:

Internal controls on financial accounting and reporting will be upgraded

Its policies and procedures relating to financial accounting and reporting will be evaluated and improved in accordance with the instructions of the Board of auditors, and additional financial reporting and accounting support will be hired.

Its corporate housing arrangements and related party disclosures will be evaluated; controls on contracts and related party transactions will be strengthened, including periodic certification

The chief compliance officer will be hired to report to the chairman of the audit committee on a dotted line, and to evaluate and strengthen the company's compliance policies and procedures.

A comprehensive training program will be implemented for all directors and senior staff, including the company's internal policies

Jarret Johnson, Vice President, General Counsel and Secretary, will leave the company

The company may take some other disciplinary action against other employees.

FF Motors said it had begun to implement the above remedies and would continue to evaluate and implement additional remedies based on the findings of the Special Committee.

At the same time, on February 1, 2022, FF also submitted a compliance plan to the NASDAQ market, summarizing the above findings and remedial measures, and said that in view of the completion of the review by the Special Committee, the company is working hard to submit the 2021 Q3 financial report and the revised investor statement as soon as possible.

FF expects a net loss of $280 million in 2021 and a net loss of $33 million in the same period in 2020, according to previously disclosed data. As of September 30, 2021, FF's total assets were approximately $1.1 billion.

In the past year or two, SPAC listing is also easy to be quickly used by speculators. They can load the most popular investor themes into listed companies and easily harvest a wave of ordinary investors' funds. Therefore, most SPAC listed companies will return to their original value within a year or two. FF Motor has been shorted three months after its listing, and it does not take the initiative to disclose its third-quarter results, so that the outside world cannot know the actual financial status of FF Automobile. Whether it will follow the footsteps of other SPAC listed companies, let us follow.

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