California-based electric vehicle firm Faraday Future today announced the results of an internal investigation following earlier charges of “inaccurate disclosures”, and states that it did identify some inconsistencies in statements sent to investors and certain weaknesses within its corporate control and culture.
The company also announced a series of structural changes. Brian Krolicki is stepping down as chairman of the board and will be succeeded by Sue Swenson. CEO Carsten Breitfield and co-founder Jia Yueting will report directly to Sue Swenson. Both Breitfield and Jia will receive a 25% reduction in their base salary. Moreover, to strengthen internal controls, the company will hire a chief compliance officer as well as additional financial and accounting support.
Faraday Future was founded in 2014 and went public in July 2021 via a de-SPAC transaction, a process in which the company merged with another previously listed company. Soon after, however, on October 7, 2021, short seller J Capital Research published a 27-page report expressing doubts about Faraday Future, including its capacity for mass production of its FF91 model, capital performance, R&D investment status, and the financial penalties Jia had been faced with in China. The firm based its report on several field research visits, company-filed financial data and public information.
In particular, the report noted that FF had fabricated vehicle reservation numbers and had lied about the company’s Hanford plant’s ability to produce electric cars at scale, indicating that Faraday Future might be intentionally disrupting market demand forecasts.
On November 15, 2021, Faraday Future filed a document with the U.S. Securities and Exchange Commission stating that it had established an internal special committee of independent directors, assisted by legal counsel Kirkland & Ellis LLP and forensic accounting firm Alvarez & Marsal, to investigate this matter.
According to Faraday Future, the special committee has concluded that “substantive allegations of inaccurate disclosures that the special committee evaluated, including those made in the short seller report, were not supported by the evidence reviewed.”