Written by Cláudio Afonso | LinkedIn | X
The chief executive of the electric vehicle startup Faraday Future Matthias Aydt shared on Thursday a message to shareholders clarifying the most asked questions the company received after reporting the financial results earlier this week.
In reaction to a tumble that reached 62 percent on Wednesday, the electric vehicle maker disclosed on Wednesday that aims to provide a strategic updated “in the next month or two”.
In the video published earlier today, the CEO, Matthias Aydt addressed significant investor concerns following the company’s recent earnings call, highlighting the tenfold increase in total share count from 40 million to over 400 million. Aydt clarified that this perceived overnight surge was due to a five-month disclosure gap, not sudden dilution.
The shares were gradually issued over several months to existing institutional investors, primarily through convertible bonds, to prevent bankruptcy and delisting amidst severe financial difficulties. Aydt emphasized the collective sacrifices made, including salary reductions and cost-cutting measures, which have positioned the company for a potential rebirth.
He also reassured that the company and original institutional investors have not engaged in transactions with the nearly 400 million shares post-issuance, reaffirming commitment to protecting retail investors’ interests.
Here’s the full video and the complete transcript below.
Complete transcript
“My name is Matthias Aydt. I’m the global CEO of Faraday Future. We had our earnings call yesterday with a very big participation compared to the other earnings calls.
As a follow-up of the earnings call we received a number of questions where you need additional information what led to the changes between our Q3 2023 filing and the 10k disclosure which we filed yesterday. So one of the numerous questions we received is why did the total share count shown on the stock trading platforms increase tenfold overnight? Regarding the increase in FS share count from 40 million to over 400 million there’s a gap between our disclosures of nearly five months. We disclosed our Q3 earnings in November last year and we disclosed our 10k just yesterday and with that there’s a gap of five months where the stock trading platforms were unable to update the data because of the missing disclosure.
That leads to the misperception that we have a dilution of tenfold overnight which is not true. The next question we got is who were the most of the shares issued to and why issuing those shares? So as of May 10th the company had a total outstanding share count of nearly 400 million. These shares were gradually issued before 2024 and over the past four months with most being issued to existing institutional investors specifically those who participated in this year’s additional issuance.
The financing corresponding to these conversions primarily represents convertible bonds they invested in at last six months prior to the conversion. As everybody knows the company has faced extremely challenging financial difficulties over the past six months. We struggled to pay rent in recent months and were on the verge of being evicted from the headquarters we purchased when the company was founded.
During this critical moment existing institutional investors have continued to support the company. The shares issued earlier were specifically to save the company from bankruptcy and delisting. Meanwhile the company implemented a series of cost cutting measures including salary reductions for all employees.
Everyone at the company has made significant sacrifices and it is through this collective effort that we now have the opportunity for the company’s rebirth. The third question we want to discuss after May 30th did the company or the original institutional investors make any transactions with the near 400 million outstanding shares that were issued before May 10th? Firstly the company did not participate in the aforementioned transaction. Secondly according to the company’s best knowledge as of May 10th the company’s total outstanding shares had reached nearly 400 million.
Additionally the original institutional investors had sold all their shares in the secondary market over the past few months so it would be impossible for these investors to trade the aforementioned shares after May 13th. Since the rise of the stock price and the restoration of confidence the company has decided to stand firmly with all individual investors and safeguard their interests while adhering to legal and regulatory requirements. We cherish the hard-won confidence of our retail investors and believe that with their collective support for both China and the United States we will overcome short sellings and successfully lead the AIV industry revolution.
Due to time constraints further clarification and interaction will follow. Thank you very much for listening to me.”
Faraday disclosed on Wednesday it had “preliminary discussions with several global OEMs and suppliers” on how the company can “help build a bridge between US and Chinese automotive industries through industrial coordination and collaboration”.
The company is expecting to provide additional details on the “US-China Automotive Industry Bridge Strategy” which reflects an adjusted corporate strategy by returning to the earlier two-brand setup to distinguish market segments.
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Faraday admitted that the move will enable the integration of FF’s high value “Ultimate AI TechLuxury” solutions and features of its I.A.I technology into vehicles in a more affordable mass market product segments.
“As part of FF’s dual-home-market strategy, FF could leverage its unique bridge value to integrate the strengths of the US automotive industry with those of Chinese car companies and the respective supply chains,” the company stated.
During the earnings conference call last night, the company did not take any questions from analysts besides the common opening remarks from the management.
The California-based startup published on Tuesday its fourth quarter and full year financial results disclosing that it is withdrawing its production target guidance for 2024.
The company stated that the reason for the decision is the “current market conditions and current levels of funding the company”. In the previous financial update last November, the company said it expected to produce about 1,000 vehicles this year.
As cash reserves risk the future of the EV startup, Faraday Future said that it “continues to pursue additional significant strategic investors”.
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“To support future growth the Company continues to pursue additional significant strategic investors to support future growth. It also is considering equipment- and IP-backed financing to potentially reduce reliance on dilutive funding,” the startup said.
“The Company does not plan to issue additional shares unless and until the Company receives shareholder approval to increase total authorized share count,” Faraday Future added.
The company disclosed a total of four FF91 EV vehicles sold and six leased for the full year of 2023. The startup recorded a revenue of $0.784 million in that period.
“We began the production of our FF 91 Futurist in March 2023 and started making deliveries to customers in August 2023 and have sold four and leased six vehicles for the year ended December 31, 2023,” the company stated.
“Automotive sales revenue was $0.8 million for the year ended December 31, 2023. We started vehicle delivery to our customers during the third quarter of 2023 and this amount is primarily driven by the four cars that were sold through December 31, 2023. There was no sales revenue for the year ended December 31, 2022,” the company stated.
Research and development expenses in 2023 were $132 million substantially lower than nearly $300 million in the previous year. The company justified the decrease by saying that the reduction is primarily related less activities around engineering, design, and testing services as they were completed in 2022.
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“The decrease in R&D expense is primarily due to the reduction in engineering, design, and testing services of $125.9 million as we substantially completed R&D activities related to the FF 91 Futurist vehicle in 2022,” the startup explained.
The company announced on Tuesday that Nasdaq granted an extended stay of the suspension pending a hearing with Nasdaq’s Hearings Panel.
The company has been confronting the possibility of being delisted from Nasdaq due to ongoing non-compliance with several key listing requirements. Over the past six months, the company has received multiple notifications from Nasdaq, highlighting critical issues that threaten its status on the exchange.
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Written by Cláudio Afonso | LinkedIn | X
