On the road of life, some dreams can be realized quickly through hard work, while some dreams cannot be achieved every time through hard work, and are also affected by many practical factors. Jia Yueting's dream of building a car falls into the latter category. On the morning of October 16, Jia Yueting published an open letter to all shareholders and investors on social platforms, reviewing the 30 major progress FF has made since the partnership company nominated a majority of directors to the board of directors at the end of 2022, and proposed to launch six measures to defend the interests of shareholders and restore market confidence.
Jia Yueting said that as FF enters the revenue delivery stage, the company is in the best development stage since its establishment, but the stock price and market value have encountered the darkest moment, which makes him "very anxious." "I personally have received unfair accusations and even threats. Despite this, we are still moving forward."
Going back to 9 years ago, Jia Yueting traveled across the Pacific to the United States to build cars and founded FF in Los Angeles, California. In the next three years, Jia Yueting began to run both domestically and abroad. Until 2017, when LeTV's capital chain encountered problems, Jia Yueting happened to be abroad and planned to return to China next week. But other problems arose during this period and developed beyond control, so Jia Yueting stayed in the United States.
New car-making forces established at the same time as FF include brands such as Weilai Automobile, Xpeng Motors and Nezha Automobile. However, while NIO's monthly sales have exceeded 10,000, FF, which started early in the morning, has only delivered 3 vehicles so far, and the company has always been on the verge of delisting.
Now, with the company's market value plummeting and mass production progressing slowly, can Jia Yueting, who claims to be wholeheartedly committed to making FF a great company, can still fulfill his promise?
"Desperate"
Jia Yueting, who lives in the United States, is often active on Chinese social media and shouts for FF.
Its latest open letter stated that since August, as FF has entered the revenue delivery stage, FF's operating fundamentals have undergone fundamental changes, and the new management team is also the strongest team in FF's history.
Of course, FF is not really good, but it is still short of money. According to Jia Yueting, in addition to being restricted by the financial situation, the company is in the best development stage since its establishment, which is a critical period for the business to take off.
In fact, FF's stock price is terrible. Jia Yueting said frankly that although the company has successfully reached major milestones one after another, providing a solid foundation for business development, the stock price and market value have encountered the darkest moments. "The company's market value has dropped to less than 1% of the total cash investment of more than 3 billion US dollars. We are extremely sad and disappointed about this, and I believe the shareholders are too."
To this end, the company will take a series of actions to defend the interests of shareholders, including six major measures: investigating potential illegal short-selling behavior; the company's core management will increase their shareholdings; fully introduce potential strategic investors; FF is undergoing organizational upgrades; the company is continuing to reduce operating and supply chain costs; inviting the media to visit FF for interviews, so that outsiders and investors can better understand the company's true value.
On November 28, 2022, FF dismissed Carsten Breitfeld as global CEO and was replaced by Chinese CEO Chen Xuefeng. On September 21 this year, FF announced that the board of directors had appointed Matthias Aydt, who has worked at FF for many years, as FF global CEO, and Chen Xuefeng will continue to serve as FF China CEO.
In this open letter, Jia Yueting reviewed FF's major improvements since the board of directors changed its top governance level at the end of last year, including the signing of a non-binding cooperation framework agreement with the Huanggang Government of China, the rollout of the first mass-produced vehicle, the receipt of four financing records (commitments), the completion of the supply of all parts for the first batch of delivery, and the holding of the "FF919 Developer AI Co-Creation Festival", etc.
However, what makes Jia Yueting frustrated and distressed is that the stock price, market value and the company's true value are completely inconsistent. He has received many requests for the company to respond, as well as unfair accusations and even threats against him.
"I am actually the most worried about the serious deviation between the true value of FF and the value of the capital market... Nine years ago, I traveled thousands of miles across the ocean to Los Angeles, California, to found FF. I ALLINed everything I had. You can imagine how difficult it is for Chinese to start a business in the United States... I have experienced all the worst things that you can imagine and cannot imagine."
The last time Jia Yueting showed his heart like this was in early July 2020, when the personal bankruptcy reorganization he applied for in the United States was finally completed.
At that time, he expressed in an open letter that he had experienced too many ups and downs in the 20 years since he started his business. Although he created an Internet ecological model that was rated as successful, the fact that he was the first person responsible for the collapse of LeTV system overnight cannot be avoided.
Jia Yueting regards FF as the only hope to pay off debts, and he said he will fulfill his promise to make FF successful. He expressed his apologies to the investors who suffered losses due to LeTV's delisting, saying that he was "an inappropriate deserter."
In the letter, he also expressed his gratitude to all creditors and investors for their trust and support, "which gave me the opportunity to restart my life, fulfill my promise, and also allowed me to embark on the road home."
Only 3 vehicles delivered
Three years have passed, and Jia Yueting's difficulty in returning home is undoubtedly related to FF's dismal performance.
Judging from public information, FF's delivery has been delayed repeatedly, and the market has become accustomed to it. As early as January 2018, at the annual US Consumer Electronics Show (CES), the FF91, which was participating for the second time, was scheduled to be mass-produced in the second half of the year. At that time, a FF staff member said that the company is currently focusing all its energy on delivering the car as soon as possible, and plans to officially deliver it at the end of 2018.
But by the end of 2018, what the outside world was waiting for was the news of Evergrande and FF going to court. With the settlement agreement reached with Evergrande, FF, which had not received funds, fell into a chain reaction of depleted cash flow, shelved factory construction plans, resignation of senior executives, and successive layoffs.
Since then, FF has made little substantial progress in its mass production plan due to funding problems. Until June 21 this year, Jia Yueting posted a long apology on Weibo, saying that there were two deep-seated systemic reasons for the delay in delivery, namely the FF team's insufficient industrialization capabilities and insufficient financing capabilities.
As for "insufficient industrialization capabilities", in essence, there is still a lack of money. Jia Yueting said frankly, "The company's extremely tight financial situation has seriously harmed the rapid advancement of our strategy. As long as there is reasonable capital investment, we are confident that we can quickly improve the overall capabilities of FF's new and old industrialization teams."
In order to break through the capital bottleneck, FF decided to take measures related to share merger and share expansion after repeated communication with investors, which solved the three major financing technical bottlenecks of FF's low stock price, insufficient number of issuable shares and too long time required for share registration.
Judging from Jia Yueting’s latest disclosure, FF received a financing commitment of US$105 million in June, part of which has been received, and the remainder needs to meet certain delivery conditions. In August, it secured an additional $16.5 million in unsecured notes.
It was not until August 14 that FF officially delivered the first FF91. The first top user was one of the largest luxury car dealers in Southern California.
A month later, FF delivered the car to the second "Super Spire" user. It is reported that the new owner is one of the top luxury real estate brokerage tycoons in the United States, and is also the producer of the popular reality show "Selling Sunset".
For this delivery ceremony, the FF official website even specially produced a live video and distributed it on its official website and major social media. However, delivering one car a month shows that FF's production capacity is still severely limited.
On September 27, Matthias Aydt, FF’s new global CEO, issued an open letter to all shareholders, stating that the company is ready to expand production capacity, but still needs to respond to and overcome challenges, including obtaining the funds needed to support future growth. According to Matthias Aydt,In the third quarter of this year, FF only delivered three FF912.0 Futurist Alliance vehicles.
To this end, the company hopes to obtain financing through the public market. According to FF’s disclosure, by signing the ATM Equity Issuance and Sales Agreement, the company may issue and sell through underwriting agents Class A ordinary shares with a total value of no more than US$90 million from time to time, and the proceeds will be used to supplement general working capital and corporate purposes.
need more money
As the stock price continues to fall, FF also faces challenges in issuing new shares. On September 27, when it was announced that it had signed an ATM equity issuance and sales agreement, the company's stock price plummeted 44% and returned to the edge of delisting at US$1.
According to the relevant Nasdaq listing rules, FF needs to maintain a minimum closing price of $1. If the closing price is lower than $1 for 30 consecutive trading days, the company will no longer meet the minimum purchase price requirements stipulated in the listing rules.
Previously, on August 28, in order to avoid delisting, FF merged its stocks at a ratio of 80:1. On that day, FF’s opening price reached $10.59.
However, in just the past month, FF's stock price has fallen by 90%. As of pre-market on October 17, FF's stock price was US$1.08, with a total market value of only US$20.09 million. According to Jia Yueting, his total cash investment in his nine-year car-making career reached US$3 billion.
It is not difficult to see that FF is trapped in a vicious cycle. The repeated delays in its delivery time and its constant reaching out to the market for money have worn away the patience of many investors, causing the company's stock price to continue to plummet, which further restricted the refinancing plan.
The bad news is that FF is still burning cash and expects to do so for the next two years.
According to the latest financial data released by the company, the net loss in the second quarter of 2023 was US$125 million, compared with a net loss of US$142 million in the same period last year. As of the end of the second quarter, total cash was US$17.89 million and total current assets were US$106 million. At the same time, FF reiterated its goal to achieve business profitability and operating cash flow to break even in 2025.
Currently, FF's "hematopoietic" capabilities, which are only delivered in single digits, are very limited. At the press conference in May, FF announced that the FF912.0 Futurist Alliance was priced at US$309,000 (approximately RMB 2.195 million).
Calculated by the number of deliveries, FF’s revenue from selling cars is less than one million US dollars. Its future survival still depends on external "blood transfusion."
In response, Jia Yueting stated in an open letter on October 16 that the company is formulating a series of measures to identify and combat potential abuse and illegal short selling. On the other hand, the company is making every effort to introduce institutional investors and strategic investors to solve the funding problem as soon as possible, vigorously promote production ramp-up, and at the same time go all out to improve the company's supply chain management capabilities and overall cost control capabilities, as well as a series of efforts to enhance the company's value.
According to media reports, on October 17, FF announced a master plan to support the company’s stable development and help the company achieve sustainability and profitability while reducing the company’s reliance on external funding sources. The company will announce more relevant details at the "Investor Day" held after the third quarter 2023 financial report.
Car-making is a "cost-burning" undertaking, and Jia Yueting's "lack of money" problem has always been with him on his car-making journey. As the stock price continues to fall, FF's future will still be full of challenges, leaving Jia Yueting with very limited room for maneuver.