Faraday Future weighs non-dilutive funding options

With cash on hand dwindling, OEM rules out seeking further dilutive financing

Faraday Future weighs non-dilutive funding options
Faraday Future hopes to strike financing deals with further Middle East partners, CFO says

Luxury California EV maker Faraday Future says it is exploring non-dilutive funding options to keep the company afloat, as the firm reports its current cash levels dwindling at only $5mn.

The company reported its full-year 2023 results this week, having already faced a Nasdaq exchange penalty notice for failing to report its earnings on time. Faraday Future has embarked on a strict programme of operating and capital expenditure reductions over the last year, but has relied for funding on stock splits and issuances which have had a dilutive effect on its share price.

"All of the shares authorised at our last shareholders meeting have already been issued and there will be no further meaningful issuance of shares, unless we receive shareholder approval to increase our total authorised share count," says CFO Jonathan Maroko. "Equipment and IP-backed financing are also being investigated".

With precious few vehicle deliveries, Faraday Future's reduction in net loss "was primarily driven by a significant reduction in operating expenses", according to Maroko. The firm also reduced its capex materially, from $123mn to $31mn for fiscal year 2023.

The company has lost an accumulated $4bn since its inception, Maroko says, and is now withdrawing its production guidance in light of its cash situation.

"We look forward to potentially reducing our reliance on dilutive funding," Maroko says. "We continue to believe that our biggest barrier to vehicle sales and profitability is the capital required to produce vehicles at scale."

However, this raises a fundamental question around Faraday Future's business model, which relies on extremely exclusive price tags for its performance EVs, meaning it is not clear precisely what degree of scale management would target if it had greater access to capital to ramp up production.

And beyond this, the company's gross margin profile — albeit without these desired economy of scale benefits — does not paint a pretty picture. The company's automotive sales revenue totalled just $784,000 in the period, compared to a cost of revenue figure of over $42mn. Therefore, while the OEM has tried to put its reductions in operating expenses front and centre for investors, it also has significant work to do on the gross cost of sales side.

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While the automaker does not give figures for vehicle sales, this revenue level amounts to only a handful of deliveries since the the company began delivering its EVs in Q3 of 2023.

Maroko says Faraday Future is exploring funding opportunities in the Middle East, after signing a cooperation agreement with UAE hedge funds Master Investment Group and Siraj Holding in November.

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