TechCrunch : Faraday Future plans to go public through a SPAC deal

Faraday Future plans to go public through a SPAC deal
Catherine Shu@catherineshu / 7:37 am CEST•October 6, 2020

Image Credits: FREDERIC J. BROWN/AFP / Getty Images
Faraday Future, the electric vehicle startup with a messy and complicated past, is planning to go public through a special-purchase acquisition company (SPAC) deal.
The company’s chief executive Carsten Breitfeld told Reuters that the company is working on a reverse merger with a SPAC and “will be able to announce something hopefully quite soon.”
Breitfeld, formerly the co-founder of Chinese EV startup Byton, declined to give more information about who Faraday is talking to or when the deal will closed. A Faraday Future spokesperson contacted by TechCrunch also said the company had no further details to share at this time.

SPACs are blank-check companies that are formed to raise money through an initial public offering in order to merge or acquire other companies. As TechCrunch’s Connie Loizos wrote in an explainer, they’ve become more popular among tech companies recently because many had their initial public offering plans delayed by the pandemic. SPACs also present an alternative to the regulatory issues surrounding traditional IPOs.

Shortly after being appointed CEO in September 2019, Breitfeld told Automotive News that Faraday Future wanted to raise about $850 million by the first quarter of 2020. By that time, company had already received $225 million in bridge financing led by Birch Lake Associates. The funding’s purpose is to finally bring Faraday’s flagship vehicle, the FF91 luxury electric SUV, to market.
Though the SPAC deal’s timeline is still undisclosed, Breitfeld told Reuters that Faraday Future plans to start volume production of the FF91, its first electric luxury SUV, 12 months after securing funding. This would represent a major milestone for the company, which was founded in 2015 but hasn’t produced a production vehicle yet. Faraday Future has made several prototypes, including one that went up for auction in August.

If the deal is successful, Breitfeld told Reuters that Faraday Future will first build the FF91 at its Hanford, California plant, but then work with a contract manufacturer in Asia that it has already entered into an agreement with.
Faraday Future’s financial issues date back to 2017, when LeEco, the Chinese tech company it was closely linked to, began dealing with multiple financial headaches of its own. They worsened when Faraday Future fell out with its main backer, Evergrande Health, in 2018.
Many of those issues were tied to Jia Yueting, founder and former CEO of LeEco and Faraday Future, who filed for personal bankruptcy earlier this year. Filings in the case revealed that Jia’s bankruptcy was funded by one of Faraday Future’s main holding companies, Pacific Technology. The documents also revealed that Faraday Future had just $6.8 million in cash at the end of July 2019.
Breitfeld told Reuters that Jia no longer owns stock in Faraday Future. The approval of Jia’s bankruptcy enabled Faraday Future to once again pursue investments to produce its electric vehicles, though now that may hinge on the success of its SPAC deal. Breitfeld acknowledged that Faraday Future’s past raises questions. “Because of the history and sometimes the bad news of the company, not everyone is really trusting us,” he told Reuters. “They want to see that we’ve become a stable company.”

>>> Brooklyn Museum is first in U.S. to sell art to help pay its costs

Brooklyn Museum is first in U.S. to sell art to help pay its costs

The pandemic has been nothing short of a disaster for many cultural institutions. Take art museums, for example: Many are facing severe budget shortfalls. New York’s Metropolitan Museum of Art may face a deficit of over $100 million this year. Some smaller museums may have to close permanently.

Next month, Brooklyn Museum will sell 12 pieces from its permanent collection, the first major museum in the United States to do so to pay for operating costs. Museums regularly sell art to acquire other art, but selling art for financial reasons? That’s long been a huge no-no, said David Yermack, a professor of finance at New York University.

“The rationale for that was really to just keep the curators from selling off the collection to overpay themselves to personally consume the value of the collection,” he said.

But then the pandemic happened.

“People have stopped coming and stopped paying admission,” said Michael O’Hare, professor emeritus of public policy at University of California, Berkeley.

That means museums will be facing budget shortfalls, said Brent Benjamin, president of the Association of Art Museum Directors.

“Anywhere from tens to hundreds of millions of dollars. So really a significant financial impact,” he said.

Art museums are in a unique position to ride out the pandemic crisis, unlike zoos or natural history museums, said Wayne State University art historian Jeffrey Abt.

“They have assets that can be translated into cash fairly quickly and fairly efficiently,” he said.

And most major art museums have a surplus of art, said Yermack of NYU. He estimated five paintings are in storage for every one on display.

“If they sold these off, not only could they improve their own financial positions, but you could really find other places for the art to be displayed,” Yermack said. “Smaller museums could build their own collections.”

And if it came to it, those smaller museums, too, could sell that art.

FT : London considers hopping on Spacs bandwagon

FT : London considers hopping on Spacs bandwagon
Blank-cheque companies are booming in the US, but the UK is being left behind

The London Stock Exchange is considering how to entice “blank cheque companies” to the UK while the US market booms.

So far this year, $48bn has been raised by US special purpose acquisition companies, or Spacs, which list on a stock exchange, raise money for an acquisition, then look for a private company to buy and bring on to the stock market. For the US, that is more than three times last year’s haul. In the UK, the 2020 running total for Spac launches is zero.

With momentum accelerating in the US and London’s initial public offerings sluggish, the LSE is engaged in early-stage discussions about how to kickstart the UK industry for lucky-dip deals.

“The banks see an enormous amount of activity going on in the US and think ‘could that be replicated over here?’ They’re interested in it,” said one person familiar with the LSE’s discussions.

Spacs have been gaining popularity in the US since 2017 as investors seek ways to make money in an era of low interest rates. The deals can also look attractive to investors looking for private equity-style deals with the added safety and liquidity of the public markets. 


Despite the uncertainty inherent in backing these shell companies, and a reputation tarnished by a series of high-profile failures after the 2008 financial crisis, US Spacs are relatively low risk for investors. Shareholders vote on whether to approve the sponsor’s target company and can get their money back whether or not the target is approved.

In the UK, investing in Spacs is a bigger gamble. Typically, shareholders are not able to vote on targets or redeem their funds so easily, although sponsors can choose to include both features. Investors generally get their money back only if an acquisition is not made within the specified timeframe, often two years.

“If you’re a UK institutional shareholder looking at that model — whether you know what the US model is or not — it doesn’t appear to be terribly attractive unless the team is led by well recognised superstars,” said Paul Amiss, partner at law firm Winston & Strawn.

When a UK Spac buys a company, the transaction is classed as a reverse takeover and the Spac’s shares are suspended. Under the rules set by the financial regulator, trading cannot resume until a deal prospectus is published, for which there is no deadline. That means Spac investors who do not support the takeover, and wish to sell their shares, can have their money locked up for some time. Several Spacs that listed in 2017 remain suspended.

That less investor friendly environment has made it difficult for all but the best connected and most trusted sponsors to successfully raise funds and launch the vehicles in London.

Bringing a Spac to life in the UK is “incredibly difficult to do under the current rules,” said Patrick Evans, head of UK equity capital markets at Citi. Investors are “totally backing the management team” of the sponsor who is looking for a company to acquire, and most will therefore probably want to have good pre-existing relationships with them. 

Carl Bradshaw, a partner at law firm Goodwin’s private equity practice, said there were “lots [of Spacs] that are talked about that don’t successfully launch”.

How to lure more Spacs to London is a challenge both the LSE and others are keen to address.

Carlton Nelson, co-head of corporate broking at Investec, said his clients had noted the high levels of activity in the US and were wondering “why they can’t be successful here”.

Analysts say changes to the UK’s Spac rules would help, such as removing the share-suspension requirement. The FCA declined to comment.

“We are in continuous dialogue with stakeholders and regulators about keeping the London market attractive and competitive for issuers and investors,” the LSE said.

Some UK investors are not yet comfortable with Spacs. “[They] have had a really chequered history,” said Gregory Perdon, co-chief investment officer at Arbuthnot Latham. “Generally speaking we tend to decline the opportunity [to invest]. We like to know what we’re going to own,” he added. 

A series of UK failures is “probably at the forefront of the disparity in activity in the European market as compared to the US,” said Mr Bradshaw at Goodwin.

Compared with the UK, the US has more Spac expertise and a deeper and less risk-averse investor base, which has helped generate interest, experts said. 

Even if UK Spacs became more investor friendly, activity might not reach US levels, Mr Bradshaw added. “The jury is still out.”

FT : Brussels reaffirms post-Brexit stance on airline ownership rules

Brussels reaffirms post-Brexit stance on airline ownership rules
BA parent IAG says it has agreed contingency plans with national regulators on non-EU shareholdings

Europe's transport chief has warned airlines that they must face up to their obligations to overhaul share-ownership structures in order to continue qualifying for single-market flying rights after Brexit.

Adina Valean, the EU’s transport commissioner, told the Financial Times that Brussels would maintain its strict rules requiring airlines to be effectively owned and controlled by EU nationals if they wanted to retain operating licences to fly in the bloc after January 1 2021.

The rules have implications for how aviation giants, including British Airways owner International Airlines Group, navigate Brexit as UK shareholders will no longer count as EU nationals. 

Airlines that fail to be at least 50 per cent owned by EU nationals risk losing their operating licences, relinquishing extensive flight privileges enjoyed in the single market, and having to rely on agreements other countries have with the bloc to try to preserve basic access. 

Ms Valean called on airlines to draw up “honest” plans that prove compliance with the rules. She said it was the job of national regulators to vet whether airlines still qualified for a licence, but that the European Commission would use its investigatory powers if other airlines or member states complained to Brussels that a company was breaking the rules.

“We are counting on the national authorities to carry out due diligence on this,” said the Romanian commissioner.

If an airline believes that “some other airlines are not complying with this obligation, then they can complain to the commission”, she said. “We are going to look very carefully and would like to see compliance, not only nominally but effectively too.”

IAG’s post-Brexit strategy has attracted particular scrutiny as the company effectively straddles the Brexit divide: it is a Spanish-registered company listed on both the London and Madrid stock exchanges with its operational headquarters near Heathrow airport in west London. 

The conglomerate became one of Europe’s most profitable airline groups following the 2011 merger of British Airways and Iberia, but has faced persistent questions over its contingency plans for Brexit. 

IAG placed a cap on the number of non-EU investors who could own its shares for most of 2019, after its non-EU share ownership reached 47.5 per cent — approaching the 50 per cent threshold. 

The group lifted the restrictions in January this year, when it said non-EU ownership had fallen to 39.5 per cent — a figure that did not consider UK nationals as being outside the EU. The board warned that it could reimpose the cap if the proportion of non-EU investors crept back up. 

The government of Qatar is the biggest shareholder in the group with a 25.1 per cent stake. 

For the moment, UK shareholders count as EU nationals because of the post-Brexit transition period which expires at the end of the year. 

IAG has said it has agreed contingency plans with national regulators, including in Spain and Ireland, though refused to go into detail about them when contacted by the FT. 

Spain’s transport ministry also declined to reveal details of the plans, though it confirmed that they had been signed off by regulators. 

“This is all without prejudice to the European Commission’s competence in terms of verifying compliance as established by the relevant regulations,” the ministry said. 

Should the commission investigate and find an airline to be in breach of EU rules, Brussels has the power to demand the company take action to meet the ownership requirements, or be stripped of its licence. 

IAG has repeatedly called for issues around the EU’s ownership rules to be addressed as part of the negotiations over the UK’s future relationship with the bloc. 

But EU diplomats said that it was far from clear that any agreement would grant special rights in the sensitive area of ownership and control. 

Diplomats noted that allowing any degree of leniency on the shareholding rule would run counter to Brussels’ push for the EU to assert its “strategic autonomy” across economic sectors, not least because of the sizeable Qatari shareholding in IAG. Officials also warned of the repercussions for the EU’s single market for aviation if other third countries demanded similar rights. 

“In general people are reticent to give in to more flexibility on ownership and control,” said one diplomat. 

Ms Valean said that no matter what the outcome of the Brexit talks, “it is clear that UK carriers would no longer have the same market access rights as an EU member state from 2021”.

A statement from IAG said the company “expects the EU and UK to agree a Comprehensive Air Transport Agreement. Flights will continue to operate as normal.”

Reuters - Saudi former intelligence chief slams Palestinian leadership's critici

Saudi former intelligence chief slams Palestinian leadership's criticism of UAE-Israel deal

RIYADH (Reuters) - Saudi Arabia’s former intelligence chief and ambassador to the United States, Prince Bandar bin Sultan bin Abdulaziz, slammed the Palestinian leadership for criticizing the decision of some Gulf states to normalise ties with Israel.
FILE PHOTO: The flags of the United States, Israel, United Arab Emirates and Bahrain are projected on a section of the walls surrounding Jerusalem's Old City, as United Arab Emirates and Bahrain sign agreements toward normalising relations with Israel at a White House ceremony, in Jerusalem, September 15, 2020. REUTERS/Ronen Zvulun
In an interview with Saudi-owned Al Arabiya television aired on Monday, the prince labelled the Palestinian authorities’ criticism a “transgression” and “reprehensible discourse”.
“The Palestinian cause is a just cause but its advocates are failures, and the Israeli cause is unjust but its advocates have proven to be successful. That sums up the events of the last 70 or 75 years,” he said in the first of a three-part airing of the interview.
“There is something that successive Palestinian leadership historically share in common: they always bet on the losing side, and that comes at a price.”
The United Arab Emirates agreed a historic deal to normalise relations with Israel in August, and the Gulf state of Bahrain, a close Saudi ally, followed suit in September.

Palestinians fear the moves will weaken a long-standing pan-Arab position - known as the Arab Peace Initiative - that calls for Israeli withdrawal from occupied territory and acceptance of Palestinian statehood in return for normal relations with Arab states.
President Mahmoud Abbas said the Palestinian leadership regarded the UAE’s move as “a betrayal”. Veteran Palestinian negotiator Hanan Ashrawi told Reuters the deal was “a complete sell-out”.
Saudi Arabia, the birthplace of Islam, has not directly commented on the normalisation deals, but has said it remains committed to peace on the basis of the Arab Peace Initiative.
Prince Bandar noted the decades-long support of successive Saudi kings to the Palestinian cause and said the Palestinian people should remember that the kingdom has always been there for them to offer help and advice.

“This low level of discourse is not what we expect from officials who seek to gain global support for their cause,” he said.
While Saudi Arabia is not expected to follow the example of its Gulf allies any time soon, experts and diplomats believe the kingdom has started shifting the public discourse on Israel.
Prince Bandar’s daughter, Princess Reema, is the current Saudi ambassador to the United States.

>>> US After Hours Summary: AYX +24.5% jumps as it guides higher,

After Hours Summary: AYX +24.5% jumps as it guides higher, names new CEO; IOVA -21.3% falls as it pushes back timeline for BLA submission

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: AYX +24.5% (guides higher, names new CEO), AMSC +2.2% (guides SepQ and DecQ revs above consensus; acquires Northeast Power Systems),

Companies trading higher in after hours in reaction to news: EEX +25.8% (announces $20 mln stock repurchase authorization), GLYC +12.8% (FDA grants a Rare Pediatric Disease designation for rivipansel), OR +7.3% (reports multiple new high-grade gold discoveries at Cariboo Gold Project), TXG +2.9% (to acquire ReadCoor), SMCI +2% (to support the new NVIDIA BlueField-2 DPU), AMGN +1.6% (announces positive topline Phase 2 results from clinical study), AVLR +0.8% (to acquire Transaction Tax Resources), UNIT +0.7% (will begin offering nationwide dark fiber services on 31,000 fiber route miles), WELL +0.2% (new CEO), ALT +0.2% (DE Shaw discloses 5% stake -- 13G filing), GH +0.1% (study shows Guardant360 Liquid Biopsy accelerates clinical trial enrollment), GNRC +0.1% (to acquire Enbala Power Networks), FTV +0.1% (VNT spinoff will be added to the S&P 500),

After Hours Losers:

Companies trading lower in after hours in reaction to news: IOVA -21.3% (pushes back timeline for BLA submission for lifileucel into 2021), YMAB -18.6% (receives a Refusal to File letter from FDA re its BLA for omburtamab), SONO -3.5% (AAPL stops selling rival headphones, according to Bloomberg), NCNO -2.2% (files for 5.5 mln share common stock offering by selling shareholders), PBYI -1.1% (announces that efficacy results of neratinib were published), LOGI -0.7% (AAPL stops selling rival headphones, according to Bloomberg), SPOT -0.2% (now allows users to search for songs by its lyrics, according to 9to5Mac), HES -0.1% (to sell its 28% interest in Shenzi Field to BHP Billiton), NFLX -0.1% (cancels Glow Season 4 due to COVID, according to The Hollywood Reporter), AZUL -0.1% (Sept traffic data),

>>> US Close Dow +1.68% S&P +1.80% Nasdaq +2.32% Russell +2.77%

Closing Stock Market Summary

The S&P 500 rose 1.8% on Monday in a risk-on trade, as investors received positive news on President Trump's health, stimulus talks, and economic data. The Dow Jones Industrial Average (+1.7%) kept pace with the benchmark index, but the advantage today belonged to the Nasdaq Composite (+2.3%) and Russell 2000 (+2.8%). 

Briefly, President Trump said he would leave the hospital tonight after responding well to several coronavirus treatments, including one from Regeneron (REGN 605.08, +40.28, +7.1%); House Speaker Pelosi and Treasury Secretary Mnuchin reportedly made progress on relief talks; and the ISM Non-Manufacturing Index for September increased to 57.8% (Briefing.com consensus 55.6%) from 56.9% in August.

The news cycle fueled a growth mindset that lifted all 11 S&P 500 sectors into positive territory, boosted small-cap stocks, buoyed crude prices ($39.29/bbl, +2.24, +6.1%) by 6%, and steepened the U.S. Treasury yield curve amid selling in longer-dated maturities. 

The energy (+2.9%), information technology (+2.3%), and health care (+2.1%) sectors claimed today's leadership positions with gains over 2.0%. The real estate sector underperformed with a 0.6% gain, but the rate-sensitive space had traded lower for most of the session amid the higher Treasury yields. 

The 2-yr yield increased one basis point to 0.14%, while the 10-yr yield rose six basis points to 0.76% -- its highest closing level since June. The U.S. Dollar Index fell 0.4% to 93.46. 

Another positive factor for trading sentiment was the S&P 500 clearing its 50-day moving average (3365) at the open and never looking back the rest of the session. The benchmark index also topped the 3400 level for the first time since mid-September. 

In corporate news, Bristol Myers Squibb (BMY 59.20, +0.48, +0.8%) agreed to acquire MyoKardia (MYOK 220.34, +80.74, +57.8%) for approximately $13 billion, or $225.00/share, in cash.

Reviewing Monday's economic data:

  • The ISM Non-Manufacturing Index for September increased to 57.8% (consensus 55.6%) from 56.9% in August. Notably, the September index eclipsed the 57.3% reading registered in February.
    • The key takeaway from the report is that it had all the right undertones to promote recovery views: new orders increased, the backlog of orders decreased, supplier deliveries slowed, prices were up, albeit at a slower pace, and employment levels grew following six months of contraction.
  • The Markit Services PMI for September increased to 54.6 from 55.0 in August. 

Looking ahead, investors will receive the Trade Balance report for August and the JOLTS - Job Openings report for August on Tuesday.

  • Nasdaq Composite +26.3% YTD
  • S&P 500 +5.5% YTD
  • Dow Jones Industrial Average -1.4% YTD
  • Russell 2000 -5.2% YTD

FT : Israeli VC firm and Dubai merchant family form tech funding alliance

Israeli VC firm and Dubai merchant family form tech funding alliance
Tie-up between OurCrowd and Al Naboodah unit is first since normalisation of relations

A leading Israeli venture capital firm is teaming up with a major Dubai merchant family to launch a funding platform to facilitate technology investments between the United Arab Emirates and the Jewish state, in the first such tech alliance since the normalisation of UAE-Israeli relations.

The tie-up between OurCrowd and Abdullah Al Naboodah’s business development unit, dubbed Phoenix Capital, will aim to create a bilateral venture-funding corridor, with an initial $100m raised from Emirati and other Gulf investors.

Phoenix will act as a platform to channel Gulf investment into OurCrowd’s 220 portfolio companies, building on the pent-up demand in the UAE for opportunities in the thriving Israeli start-up scene.

The Israeli company, a $1.5bn fund that deploys capital on behalf of small and medium-sized investors, hopes to launch its companies into the UAE, capitalising on the diversified nature of the Al Naboodah Group conglomerate, which spans from the automotive and construction industries to travel and real estate.

Founded by Israeli-American tech entrepreneur Jon Medved, OurCrowd will also identify UAE-based start-ups seeking to grow in Israel by collaborating with its portfolio companies.

“This is not the governments that are trying to impose things or get some window dressing,” Mr Medved told the Financial Times. “This is real people who want to get things moving.”

Within days of the announcement of the historic normalisation deal in August, talks began between the two sides. A memorandum of understanding is expected to be announced this week.

Despite not having formal relations, the UAE and Israel had for years been dealing with each other secretly, with contacts especially strong in the tech sector.

Mr Naboodah, chairman of Al Naboodah Group’s investment arm, said the deal would open the path for a “two-way street” of investments, with a focus on agritech and robotics.

“This will also enhance start-ups in the Gulf, and at the same time we will with OurCrowd raise funds to invest between the UAE and Israel,” he said. The partnership would seek to deploy the capital in 25 to 30 opportunity-driven deals within the first year, he added.

Sabah al-Binali, an Abu Dhabi-based private equity investor, has been appointed as OurCrowd’s head of the Gulf region to lead its expansion.

“The commodity-fuelled excess financial capital of the UAE fits well with Israel’s surplus technology and innovation,” he said. “This will accelerate investing in opportunities both in Israel and the UAE.”

Mr Medved believes the surge of money and ideas between the two nations will extend into “billions of dollars” of trade and investment.

Opportunities under consideration — from desert agriculture and logistics, to smart cities and education — will amount to “serious investments”, he said.

“For OurCrowd, we’re talking about big checks — hundreds of millions of dollars,” he said. “I would be disappointed if over the next several years we didn’t see those kinds of numbers.”