Auto maker Faraday acts on Evergrande 鈥榝ailed payment鈥
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China鈥檚 Evergrande Health Industry Group Ltd shares slumped yesterday on news it was being sued by electric vehicle startup Faraday Future for failing to make a payment and that Faraday was looking to scrap a deal to sell a stake.
Evergrande Health, a unit of property developer China Evergrande Group, had in June agreed to buy Season Smart, owner of 45 percent of Faraday Future, as part of plans to diversify into new technology.
The Hong Kong-listed firm agreed to pay Faraday US$1.2 billion in two equal installments, due in 2019 and 2020, completing Season Smart鈥檚 obligations to Faraday Future, which was founded by entrepreneur Jia Yueting.
Evergrande said it had also agreed in July to make an advance US$700 million payment, subject to some conditions, following a request from Faraday that was short on cash.
Faraday is now using the US$700 million payment agreement as an excuse to seek arbitration, despite the payment obligations not being fulfilled, Evergrande said in a statement on Sunday.
Faraday Future, in a statement posted on its official Weibo account yesterday, rejected Evergrande鈥檚 claims.
The EV firm said Evergrande had initiated an agreement to make an additional payment to Faraday by the end of 2018.
Faraday said the Chinese investment holdings company did not keep its promise even though both the startup and Jia had fulfilled all payment conditions.
鈥淩ather, Evergrande tried to acquire the control and ownership of all FF鈥檚 IP (Faraday Future鈥檚 intellectual property),鈥 it said in the statement.
Evergrande also stopped Faraday from getting any financing from other channels, it added.
Faraday Future, which has ambitions of overtaking Tesla, said it will soon ensure mass production of its first high-end vehicle, FF91, and that it welcomes 鈥渋nvestors with the same value as FF to pursue the dream together.鈥
Faraday did not make any reference to a lawsuit against Evergrande in its statement.
According to Evergrande鈥檚 statement filed with the Hong Kong Stock Exchange, Jia has started arbitration at the Hong Kong International Arbitration Centre against Evergrande.
Evergrande said it would take all necessary steps to protect its rights.
Jia is manipulating Faraday Future鈥檚 board through his majority seats and is seeking to deprive Evergrande of its right as a shareholder to approve plans by Faraday to raise financing in the future.
Leshi Internet Information & Technology, which is the main listed unit of Jia鈥檚 debt-laden conglomerate LeEco, declined to comment. Leshi shares closed down 7.9 percent. Evergrande tumbled as much as 36.6 percent in yesterday鈥檚 morning session but closed down 16.5 percent.
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