Palantir-Backed EV Maker Faraday Future Dubbed The 'New EV Scam In Town' By Short Seller: What You Need To Know

Faraday Future Intelligent Electric Inc FFIE shares are trading 3.5% lower in the pre-market session on Friday after activist short seller J Capital Research alleged that recently-listed EV SPAC is a scam and that it would never sell a car.

What Happened: The short seller’s latest report alleges that China-based Faraday Future has invented most of its bookings and failed to deliver a single car.

“So far, it's nothing but a bucket to collect money from U.S. investors and pour it into the black hole of debt created by its founder, China's best-known securities fraudster, Jia Yueting,” Anne Stevenson-Yang, co-founder, J Capital Research wrote in her report.

2/$FFIE has reneged on every promise it ever made to start a factory. Why should the current one be any different? And to be sure, we visited: For a company supposedly rushing to “mass” manufacturing in 7 months, the plant is awful quiet.

— J Capital (@JCap_Research) October 7, 2021

The company plans to restart its abandoned factory in Hanford, California and mass-produce cars in just seven months.

The report alleges Faraday Future has gone back on its promises to build factories in five localities in the U.S. and China and repeatedly delayed the sixth as well.

See Also: SPAC Wars: Lucid Motors Vs. Faraday Future — Battle Of The Luxury Electric Vehicles

Yang said she has visited the factories and for a company that is expected to start “mass” manufacturing in seven months, "the plant is awfully quiet."

“We doubt that timeline will hold: three recent visits to the factory showed little activity, and company formers told us there are still engineering problems to work out."

The report calls FFIE the "malformed lovechild" of the imperiled Chinese real estate developer Evergrande EGRNY. 

“We expect Evergrande, which owns 20.5% of this company and stands to gain more equity, to sell off its shares as soon as the lockup period ends, in January 2022 if not, quietly, before that,” the short seller said.

Faraday Future’s filings reveal it expects to need an additional $1.4 billion in funding by 2024 to achieve its financial targets, as per the report.

Why It Matters: Faraday Future went public in a $1 billion SPAC deal early this year and began trading on the Nasdaq. FFIE is backed by data analytics company Palantir Technologies PLTR, which invested $25 million in its PIPE.

The report named "Move Over Lordstown: There's a New EV Scam in Town." draws a comparison with short seller Hindenburg Research’s report in which it accused Lordstown Motors Corp RIDE of fudging order data and production capabilities.

See Also: Lordstown Motors Could Have Cash Lifeline With Foxconn Factory Sale

Hindenburg had said Lordstown’s “10,000 non-binding orders” are largely fictitious and used as a prop to raise capital and confer legitimacy. The pre-production EV startup has since undergone many changes after its CEO Steve Burns resigned along with a few other key executives. 

Hindenburg Research had also targeted Nikola Corp NKLA and called the company an "intricate fraud."

Faraday Future founder Jia Yueting dismissed the short seller's allegations in a post on Chinese social media platform WeChat, as per cnEVpost. "Same nonsense, nothing more than a hash of old news," Yueting reportedly wrote in English. "Watch out, J Capital Research. It's not the first time you have made a fool of yourself."

Price Action: FFIE shares closed 9.80% higher at $8.40 a share on Thursday and are down 3.5% at $8.10 in the pre-market session on Friday.