Chinese property tycoon Sun Hongbin said he had never regretted anything until he blew $2 billion backing Jia Yueting’s troubled conglomerate LeEco. But the teary-eyed confession by the chairman of Sunac Holdings doesn’t seem to have given rival property baron Xu Jiayin much cause for pause before reportedly spending $300 million to take over Jia’s loss-making electric car startup Faraday Future.
Top-three Chinese developer Evergrande Group is believed to have invested around $300 million in Faraday Future at 2017 year-end to become the firm’s largest shareholder, according to a recent report by Tencent’s news outlet Yixian citing sources familiar with the matter.
A Hong Kong-based company controlled by Evergrande injected the funds into a Faraday Future affiliate registered in the Cayman Islands before Christmas, the report said. The investment equated to a 20 percent stake in the electric vehicle maker, which was valued at approximately $1.5 billion at that time.
Following the investment, Guangzhou-based Evergrande has reportedly assigned financial personnel to Faraday Future’s US and China units to take full control over the car maker’s finances. As a condition to allowing Evergrande to become the supercar maker’s largest shareholder, Jia is said to have requested to retain his position as the CEO of Faraday Future for another 15 years.
Faraday Future Planning Guangzhou Plant
According to a Business Insider account in February, Faraday Future had secured $1.5 billion in new investment from a Hong Kong-based entity, with about $300 million of that cash said to have arrived in early December. That cash came in addition to an earlier $550 million tranche, with a third shot of $250 million having been received in February. It is not clear whether this unidentified investor is the Evergrande vehicle.
On April 8, a company reported to be an affiliate of Faraday Future bought a 400,000 square metre site in Guangzhou zoned for electric car manufacturing and research and development. Observers point to this investment providing further links to Evergrande, which is based in the southern Chinese city.
The Faraday affiliate, Ruichi Intelligent, spent RMB 364.1 million at auction to purchase the site in the Wanqingsha Bonded Port Area of Nansha district. Under government guidelines, Ruichi Intelligent is required to build a “pure electric vehicle assembling project with world-leading pure electric vehicle R&D and manufacturing technology,” and the plant must be completed and launched within 24 months, according to a report.
Jia Gets Help from Property Tycoons
Evergrande’s deal for Faraday comes just over a year after Sunac China and its boss, Sun Hongbin, received lessons from Jia Yueting on how innovative technology investments can make money disappear.
Sun, who runs China’s fourth largest developer by sales, agreed to inject RMB 15 billion ($2.36 billion) into Jia Yueting’s embattled technology and media conglomerate LeEco in January 2017. In a press conference last September, Sun even vowed with tears in his eyes that he would bring LeEco back to normal.
The property tycoon proved his commitment in November by providing another $270 million in loans to Leshi Internet and Leshi Zhixin, LeEco’s television units. However, Sun’s optimism did not last long. One year after his initial investment in LeEco, Sun indicated he would not extend his investment in Leshi, saying that “people should admit defeat because sometimes it works, sometimes it doesn’t,” in an online conference with investors this past January. The property developer officially pulled out from LeEco last month by resigning as the chairman of a LeEco unit.
The exit of his one-time supporter adds to the pressure on Jia as the self-made billionaire sometimes compared to Steve Jobs is pursued by his creditors and the Chinese government. Last July, China Construction Bank successfully sued to freeze $37.2 million in assets held by Jia Yueting and LeEco in Beijing’s courts. In the same month, China Merchants Bank had $182 million in assets belonging to Jia’s family and LeEco frozen by Shanghai courts.
Despite demands from Chinese regulators for him to return to the country, Jia Yueting remains in the US.
Faraday Report Follows Evergrande Vow to Invest $16B in Tech
Jia’s controversial track record apparently did not deter China’s richest property mogul from putting his faith in Faraday Future. The reported electric car investment comes as Evergrande boss Xu acquires a taste for high-tech businesses.
Earlier this month, Evergrande Group announced that it would invest RMB 100 billion ($16 billion) over the next decade in developing a trio of high-tech industry bases in China for life sciences, aviation, quantum technology, artificial intelligence, robotics, modern agriculture and new energy vehicles.