Arbitrators ruled that Evergrande could no longer prevent the EV-company Faraday Future (FF) from seeking funding from other financing sources in the emergency arbitration between the EV-company Faraday Future’s CEO Jia Yueting and Evergrande Health Industry Group Ltd. on Oct. 25.
FF called the results a “decisive victory” in a public statement published that same day.
Evergrande is FF’s largest shareholder. But its breach in FF’s funding obligations, and efforts to stop FF from acquiring other investments, caused a serious cash shortfall that forced the company to take drastic measures just to keep their head above water during the fight with its main investor. Many employees had their salaries cut by 20 percent and others were laid-off. Jia Yueting even lowered his own salary to 1$ to make ends meet.
“Faraday Future is facing issues with its current funding because of Evergrande’s failure to live up to its end of the bargain and make the payments it agreed to,” the company wrote in an email that was sent out to staff members.
The arbitrators permitted FF to seek up to $500 million funding from external investors aside from the existing $2 billion deal with Evergrande. But as the main investor, Evergrande has the right to refuse any potential investors, according to a filing with the Hong Kong Stock Exchange.
The decision was only a temporary solution to FF’s urgent financial issues. In fact, the original intention of Jia Yueting’s application for the ruling was to have Evergrande pay an advance of $700 million, but they were unable to reach an agreement. The temporary measures at least allowed Jia Yueting to keep FF afloat.
It should be noted that these are the result of an emergency arbitration, only aiming to implement temporary measures before a formal arbitration takes place. This means that the final results are still uncertain.