What's up guys and welcome to wall street millennial today we're doing a video about the epic rise and fall of electric vehicle startup faraday future founded in 2014 by chinese billionaire jiua, ting faraday positioned itself. As a tesla killer, they would make a fully electric autonomous vehicle. It would support full self-driving in-vehicle, wi-fi and entertainment and have a modular design allowing for new models to be mass produced with ease the faraday car would have 15 higher energy density than the model s and be ready for full-scale deliveries in 2017. fast forward to 2019 And faraday has burned through billions of dollars of cash, they abandoned their plans to build a one billion dollar factory in nevada.

They have laid off the majority of their staff and founder giu 18, who goes by yt, was forced to declare personal bankruptcy in 2021. Four years after their targeted launch date of 2017, faraday has yet to deliver a single card to an end. Customer in this video we'll go over how faraday was founded, what went wrong in their development and whether we will ever see a faraday car on the road faraday future was founded in 2014 by chinese billionaire yt hailing from shanxi province in china. He made his fortune in the booming internet industry of the early 2000s.

He founded lee.com an online video company. It became a major success with many calling it the netflix of china. He used the profits to build a conglomerate called lee eco, which had business interests in a broad range of industries from electric bikes to smartphones and movie production. The success of these ventures elevated him to billionaire status, with a net worth of 3.2 billion dollars in 2014..

At around this same time, elon musk's tesla motors was experiencing impressive success. Defying most auto analyst expectations. The tesla cars were a major hit with consumers and the company had grown to a market cap of about 25 billion dollars. Yt saw tesla's success and realized that electric vehicles represented a massive opportunity for him to 10x his wealth.

He then moved to california and started his own ev company. He named the company faraday future after chemist, michael faraday, michael faraday is credited with discovering key chemical processes which make electric batteries possible. Yt used his money to hire, experienced executives from tesla, aldi and bmw with the financial backing of a powerful tech billionaire. It seemed that faraday had a real chance of becoming the next tesla.

In 2015, faraday announced an ambitious plan to build a 1 billion gigafactory in nevada. They chose nevada because of generous subsidies that they received from the pro-business republican government at the time faraday planned to build their factory in the apex industrial park, which is a few miles north of las vegas. They promised the factory would support 4 500 full-time jobs once fully operational. The state gave faraday 215 million dollars worth of tax incentives and also subsidized the construction of a four mile rail track, which would help faraday to move materials to and from the factory.

They had an ambitious timetable for the factory and plan to deliver hundreds of thousands of vehicles per year in 2017. Just two years later, in 2015, there was a lot of hype around the new ev startup faraday future, despite the fact that they had not even unveiled the prototype of their car, they claimed that they would use a modular skateboard-like design which will allow for easily changing The number of batteries the length of the frame and number of motors this would allow them to make a variable platform architecture. Once they complete the variable base, they would be able to quickly make new models by changing the modules they also promised to have internet connectivity and autonomous driving infrastructure, which would allow for a connected smart vehicle with so many innovative features. Consumers and industry analysts alike, waited eagerly for faraday to unveil their prototype at the 2016 consumer electronics show or ces at the 2016 ces they unveiled the ff01 a futuristic race, car that showcased their modular and autonomous technology.

However, the ff01 was merely a concept car and would never actually be produced very few if any of the design components showcased in the ff01 would end up in faraday's production vehicle. This was widely seen as a major disappointment, as most industry observers expected them to unveil their production car. The fact that they only showed a concept car suggested that they were running behind schedule on the design of the production vehicle techcrunch reporter matt burns. Confronted faraday's senior vice president mick sampson about their failure to show any details about their production car in this awkward exchange.

So if it's really that good - and i really trust what alex roy has to say - why show us this thing? Why not show us the good thing, i'm serious, i mean this. Was your big unveiling? You guys have been hyped for months. It was like a blockbuster movie how how many days before it was launched. Did you see one of these, but this is from the most successful company in the world and they don't show what they're doing until the day you walk through the store but you're an unknown.

So do we need to show? Well i mean this is this? Is your hype right now i? How much did you focus on the hype rather than the building of it? Well we're flat out high speed working towards the production model that will be out in record time compared to most most other manufacturers and uh. We've got a team of uh several hundred people back in los angeles at the moment, working working away, developing that production car and we we developed this car in our spare time. This was a this was a project of passion of the people involved yeah. It looks like somebody's baby for sure one year later, in 2017, faraday finally unveiled their fully electric production car, the ff 91 at the consumer electronics show they claimed that it could accelerate from zero to 60 miles an hour in less than two and a half seconds.

It was also equipped with internet connectivity and autonomous, capable hardware it offered autonomous parking that could be activated remotely with the ff app they also claimed. It would have an industry-leading battery range in excess of 400 miles, despite the high estimated starting price of 300 000 dollars. The incredible hype around the new technology allowed faraday to book more than 64 000 reservations within 36 hours of unveiling the ff-91. These reservations alone would generate more than 19 billion dollars of sales.

However, to achieve these sales they would actually have to deliver the vehicles, as elon musk says. Prototypes are easy. Production is hard. It's one thing to design the technology for a single handmade showpiece.

Setting up an assembly line for mass production is a whole. Another ball game. Things were not going as planned at faraday's 1 billion factory development in nevada. They burned through almost all of their money to develop the technology for the ff01 concept, car and ff-91 production car.

They were forced to delay the construction of the factory until they could secure additional funding. Up to this point, most of the company's funding came from yt's personal fortune. Despite his billionaire status, he didn't have enough cash on hand to continue funding. Faraday's massive cash burn with zero revenue coming in faraday needed billions of dollars per year of outside funding, to keep the lights on and ramp up for production, desperate to keep his eevee startup afloat.

Yt borrowed money against his various businesses in china to secure cash as the debt load increased, his chinese companies were unable to make interest payments and were declared to be in technical default. The creditors of yt's chinese companies sued him for failing to make good on his debts and improperly pushing faraday's debt load onto his unrelated chinese companies. In 2017, a chinese court ordered yt to return to the country and answer for the unpaid debts instead of complying with the order he sent his wife back to china to resolve the issues the chinese authorities viewed this as an act of arrogance that placed him on The debt blacklist, they froze all of his assets in china and he would likely face arrest if he ever returns with yt's assets. Frozen things were not looking good for faraday's funding prospects in light of faraday's, precarious financial position.

Chief technology officer, ulrich kronz, as well as chief financial officer, stephen krauss, resigned from the company. They went on to found their own ev startup canoe, which went public via us back in 2020 and copied the same modular design concept that faraday developed with most of his executive team. Abandoning the company things were looking pretty bad for faraday and yt running out of cash. They abandoned construction of their halfway completed nevada factory, but yt wasn't going down without a fight having been blacklisted from his own home country of china and his chinese assets frozen all that remained of his once great fortune was his beleaguered ev startup in december of 2017.

He secured one billion dollars of capital from outside investors in exchange for a 25 equity stake in the company. Despite the production headwinds that they were facing, this gave faraday a respectable valuation of 4 billion, with the funding secured. Yt was confident that they could start making deliveries of the ff-91 by the end of 2018., with the ambitious nevada plant abandoned, they leased a smaller factory in hanford california. It had the capacity to produce 10 000 ff91s per year.

Building an ev assembly line from scratch is extremely difficult. It requires expensive machinery as well as trial and error by the summer of 2018. They had already burned through the one billion dollars that they raised just six months prior in august of 2018 yt raised another hail mary round of funding. He raised 854 million dollars from chinese investment company evergrand group in exchange for a 45 stake in the company.

This valued faraday at 1.9 billion dollars less than half of its valuation. In the previous funding round. Just six months earlier by october of 2018, it became clear that the ff-91 would not be released on the planned date, even with the recent equity raise. They were running out of cash to pay their employees.

They were forced to lay off 40 of their staff and give 20 pay cuts to those who were not laid off. Yt reduced his own salary as ceo to a symbolic one dollar per year. In august of 2018, they officially announced a delay in production for at least another year, with the ff 91 delayed and cash running scarce again, faraday needed a new funding round. To this end, they struck a deal with chinese online gaming company, the 9 to form a 50 50 joint venture under the deal.

The 9 would provide up to 600 million over the course of the project which faraday would use to develop an electric minivan called the v9. The 9 is a shanghai-based online video game company that holds the exclusive rights to distribute world of warcraft games in china. It is unclear why they want to get involved in the ev space. It was also unclear how the nine would get the 600 million dollars it promised to faraday.

The nine is a penny stock which, at the time, had a market valuation of about 100 million dollars in annual revenues of 10 million dollars. When the deal was struck, the nine paid a down payment of only five million dollars, with the remaining 595 million dollars to be paid an installment subject to various operational milestones. To date, there has been very little progress on the v9 and it seems unlikely that the nine will be able to provide any more meaningful funding with billions of dollars of net debt, piling up and zero revenue. The clock was ticking for faraday.

They were facing multiple lawsuits from numerous suppliers who claimed that faraday had defaulted on 80 million dollars of unpaid credit lines. With the lawsuits piling up, it was clear that the company could not operate in its current form any longer in may of 2019. They secured a 225 million dollar line of credit from a distressed debt investor and started a massive restructuring plan. The 225 million dollars would help faraday pay past due payments to its vendors and suppliers.

This emergency funding round saved the company, as they were just a few weeks away from declaring bankruptcy as part of the restructuring faraday had to cut its operating expenses down to the bone. They laid off even more workers who had previously been on unpaid furlough. With these latest layoffs, the company had only 350 employees down from more than one thousand the year prior founder yt also stepped down as ceo, but continues to serve as the chief product and user officer. He was replaced as ceo with carson breitfeld carson is an accomplished industry professional.

He formerly worked at bmw where he was in charge of developing the i8 luxury electric vehicle yt borrowed extensively against his personal wealth to fund faraday and was not able to make good on his debts. In october of 2019, he filed for chapter 11 bankruptcy protection with more than three billion dollars of outstanding debts. This bankruptcy affected yt's personal business dealings, but did not directly affect faraday's operations. His stake in faraday was greatly diminished by the bankruptcy proceedings, but he is still deeply involved with the company, while faraday has still yet to sell a single car.

There is still hope for the company's survival they were saved by the stat craze of 2020 and 2021. As well as the general hype around evs in january of 2021, they announced their plan to merge with property solutions, acquisitions corp in a deal which would raise about 1 billion dollars at an equity valuation of 3.4 billion dollars. They plan to release the ff 91 in the first quarter of 2022 with a list price of 180 000. This is almost four years after the initial release date in 2018.

Over the next few years. They expect to release two new models: the ff-81 and the ff-71. Following a similar model to tesla, they plan to gradually roll out cheaper cars over time. Their goal is to start deliveries of a 45 000 ff 71 in 2025, which will compete with the tesla model 3..

However, given their long record of delays, it is highly uncertain as to when we will see the first faraday vehicle on the road. Despite faraday's past difficulties, investors seem to be giving them the benefit of the dell. The spec is now trading at 15, 50 percent. Above the initial price of 10, they claim that the luxurious interior and high performance of the car will be industry leading this should make the high price point of 180 thousand dollars attainable if they can follow through on their timeline.

They are also in talks with chinese automaker greely for potential jv, which would be subsidized by a chinese city. Such a joint venture would give them the potential to access the chinese ev market, which is the largest in the world. They will make zero revenue in 2021, but expect to generate 21 billion dollars of sales in 2025.. However, investors should take these projections with a large grain of salt, as the company has failed to sell a single car in the six years since its founding in 2015..

While faraday faces immense challenges and an uncertain future, their one billion dollar spec financing gives them a fighting chance of survival. Their luxury ff91 is one of the most advanced evs coming onto the market in recent years. Faraday future is the story of a tech billionaire who decided to risk everything on a risky project. Building an electric vehicle mass production operation is extremely difficult.

Even tesla came within single-digit weeks of bankruptcy during 2008, as well as the model 3 ramp up. Yt sacrificed everything he had to develop faraday he drove himself to personal bankruptcy and got himself blacklisted from his home country. Whenever the company was wobbling on its last legs, he was always able to secure emergency funding to keep his operations afloat even if just barely with their recent smack merger. Yt's dream of creating an ev company to compete with tesla still has a fighting chance of fruition.

Alright guys that wraps it up for this video, what do you think about faraday future? Let us know in the comment section below, as always. Thank you guys so much for watching and we'll see in the next one wall, street millennial signing out.