(Yicai Global) March 25 -- Troubled electric car startup Faraday Future has received a new lifeline, this time from Chinese internet company The9.
The two firms will set up a 50-50 joint venture to make and sell Faraday Future's model V9, its flagship luxury smart electric vehicles, in China, Shanghai-based The9 said in a statement yesterday. The9 may contribute as much as USD600 million to the JV in stages.
The9, which has completely abandoned its mobile gaming business and turned to blockchain technology, needs to raise the money in the US stock market, a person with knowledge of the matter told Yicai Global.
The deal signals the start of a collaboration between Jia Yueting and Zhu Jun, two famous Chinese internet entrepreneurs. It offers another chance for Jia's Faraday Future, which develops electric smart cars in the US and has been dogged by funding issues, after his dealings with two property developers Sunac China Holdings and Evergrande Group went south.
"This is different from the deals with the two real estate developers. Zhu wants to use the money raised in the US to build a JV in China," said the source, who believes that The9 may not be able to raise USD500 million in the first round of financing.
"It will take whatever it can get," he added. "The most important thing now is to start the project. Cars must be produced before the end of this year."
The new JV will make, market, distribute and sell Faraday's new model and other potential follow-up models in China. It is expected to produce 300,000 units a year. Sales of pre-production cars are scheduled to begin next year, the statement said.
The9 will have management and operation rights, while Faraday will provide property rights and resources, including building production facilities in China and authorizing the JV to produce and sell designated models.
Jia released his first production car, the FF91, at the 2016 Consumer Electronics Show, with a CNY2 million (USD298,000) price tag. Since then, his car-making dream has not made much progress amid financial distress and commercial disputes. Faraday's founder claims the firm is promoting mass production of this car, though he has lost many veteran employees, including the founding team, because of the funding crunch.
Jia's new partner Zhu used to have China's online game sector under his thumb, but has gone downhill in recent years. They are both internet entrepreneurs, and understand each other's difficulties. Zhu also supports Faraday's plan to go public next year, which Jia announced last year.
"Jia has projects and lacks financing channels, and Zhu owns a listed company that can raise funds but lacks projects," a person close to The9 told Yicai Global. "That's why the two reached a cooperation deal. Plus they have similar personalities."
"Faraday Future values The9's operational capability for end users, and The9 wants to become a diversified high-tech company through better projects," he added. "They supplement each other."
Thanks to his poor reputation, some market participants believe it will be hard for Jia to win the trust of the capital market. That puts a big question mark over the financing. But the source close to The9 says the market has expressed interest in the transaction, according to feedback from investment banks.
Raising funds to expand into new businesses also helps to put Zhu's past behind him. The business transformation could help The9 relist on the Nasdaq Global Market. The9 was forced to switch to the Nasdaq Capital Market last October because of a sluggish share price and low market value.
The Nasdaq Capital Market has the lowest listing threshold among the Nasdaq's three venues, and is mainly used to attract smaller and riskier companies.