Chinese electric vehicle firm Faraday Future can seek financing from sources other than Evergrande Health, according to an interim ruling by a Hong Kong arbitration court in a dispute between the startup and its main investor.
The ruling, however, caps the amount of financing at $500 million and stipulates that any fresh equity fundraising cannot be at a discount to the deal with Evergrande Health, according to the statement from the unit of property giant China Evergrande.
Evergrande Health also has preferential rights to any new share issue by Faraday, the statement said.
The firms are embroiled in a bitter standoff over the terms of planned $2 billion investment by Evergrande Health, which has bought 45 percent of Faraday as part of a plan to diversify into new areas.
The ruling comes at a crucial time for cash-strapped Faraday which accuses Evergrande Health of not fulfilling a promise to provide funds. It said this week it plans pay cuts of 20 percent for all staff, in addition to an unspecified number of lay-offs, in a bid to reduce operational costs.
Faraday is led by entrepreneur Jia Yueting, best known for founding the tech LeEco conglomerate that expanded into too many areas too fast, resulting in high debt levels and a cash crunch. Jia has since resigned from the conglomerate’s main listed unit to concentrate on building up Faraday.
Faraday, which this month sought to terminate the deal at the Hong Kong International Arbitration Centre, said in a statement the ruling had concluded it had a case against Evergrande Health.
Evergrande Health saw its shares rally 9 percent on the conditions imposed on any equity financing. An official for the company also said there has been as yet no decision to allow a termination of the deal.
The dispute centres on a planned advance payment of $700 million by Evergrande to Faraday subject to some conditions. Faraday argues that Evergrande has reneged on the agreement but Evergrande has countered that Faraday has not fulfilled the conditions.
Faraday, which plans to build its cars at a plant in Hanford, California, said that a preproduction model of its first vehicle, the FF 91, was presented to employees on August 29 ahead of schedule.
Reuters