Faraday Future Intelligent Electric (FFIE) was long seen as the electric vehicle maker that would challenge Tesla's (TSLA) dominance. The company has even embraced the title of Tesla's No. 1 competitor.
It is clear that the two groups no longer seem to play in the same courtyard.
Tesla is now more concerned with exceeding one million vehicles produced per year. A performance that the group led by Elon Musk should achieve this year despite the disruptions observed in supply chains around the world and soaring raw material costs, like nickel, palladium and aluminum.
And to drive the point home, Tesla's market capitalization exceeds $1.12 trillion when that of Faraday is barely at $1.60 billion as last check.
The gap between the two companies has continued to grow against Faraday. It could widen further as Faraday faces a wall of investigations.
The firm announced Thursday that the Securities and Exchange Commission (SEC) has opened an investigation into Faraday's statements about pre-orders of its only electric vehicle in the period leading to its public offering. Faraday came public via a merger with a special purpose acquisition company, or a SPAC, named Property Solutions Acquisition Corp. that provided the embattled automaker with $1 billion.
The Company and Employees Subpoenaed
"The company, certain members of the management team and employees of the company received a notice of preservation and subpoena from the staff of the U.S. Securities and Exchange Commission," Faraday said in an SEC filing.
The federal regulator's investigation relates to revelations from an internal investigation by Faraday. This investigation was carried out by a special committee that "had completed a previously announced independent investigation into allegations of inaccurate company disclosures," Faraday said.
"Since then, the company continues to implement the appropriate remedial actions approved by the special committee and continues the additional investigative work and remedial work as recommended by the special committee, under the direction of the executive Chairperson and reporting to the audit committee of the company’s board of directors."
Faraday warned that "that work may result in further findings and remedial actions."
The SEC notice is "stating that the SEC had commenced a formal investigation relating to the matters that were the subject of the special committee investigation," the firm said.
Faraday said it is cooperating "fully" with the SEC’s investigation.
In February, Faraday announced that chairman of the board Brian Krolicki had stepped down after an internal investigation showed that the company had made statements about pre-orders of its electric vehicle that could have misled investors.
"The Company’s statements leading up to the Business Combination that it had received more than 14,000 reservations for the FF 91 vehicle were potentially misleading because only several hundred of those reservations were paid, while the others (totaling 14,000) were unpaid indications of interest," Faraday said at the time.
The company also said that the investigation identified material weaknesses in its internal controls, and that it needed an upgrade in personnel and systems.
Corporate Culture Failed
"The company’s corporate culture failed to sufficiently prioritize compliance," Faraday concluded. "The Company, under the direction of the executive chairperson, will continue investigative and remedial work, including regarding whether inaccurate disclosures were made relating to its corporate housing arrangements and its related party disclosures."
The carmaker had to part with certain executives, recruited a new chief compliance officer and warned that it "may take certain other disciplinary actions with respect to other employees."
These difficulties sum up the story of Faraday, co-founded in 2014 with a lot of buzz by Jia "YT" Yueting, a Chinese millionaire and owner of a media conglomerate in China.
Faraday announced at the end of February that he had finally succeeded in producing a car, the FF 91. The full production of this luxury SUV is on schedule and will start in the third quarter of 2022, according to the firm.
Before the start of production in the summer, Faraday Future will focus on "pre-production builds for final engineering validation and certification."
The startup, which is also called The FF 91 Futurist Alliance, made a sensational debut on the automotive scene in 2014 by bringing in top talent from Tesla, BMW undefined , Audi (VLKAF) , Ford (F) , Lamborghini, Google (GOOGL) and Ferrari (RACE) .
Faraday was also at one point mistaken as a secret front operation for Apple's self-driving project.