Evergrande Health subsidiary Season Smart has filed arbitration counterclaims to the fullest extent against Faraday Future CEO Jia Yueting and Smart King—a joint venture between Season Smart and Faraday Future. The arbitration counterclaims demand Jia and the joint venture to perform their contractual obligations.
“Jia Yueting and the joint venture forcefully evicted the cashier appointed by Season Smart and denied the Season Smart financial personnel of physical entry for conducting financial inspection, resulting in Season Smart not being able to understand the financial conditions of the joint venture,” Evergrande Health said in an announcement (in Chinese) on November 7.
Evergrande Health said Season Smart is entitled to conduct financial inspections and appoint a cashier to the joint venture under the shareholders’ agreement. A Season Smart-appointed director of the joint venture has commenced proceedings in the Grand Court of the Cayman Islands requesting the court to order the joint venture to produce financial information and related documents.
In response, Faraday Future refuted Evergrande Health’s claim saying that it did hold up its end of the agreement.
Up until early October when it filed for arbitration against Evergrande Health, Faraday Future claimed that it had been providing full support to Evergrande Health appointed financial personnel to enter and conduct financial inspections and producing detailed financial information and records. “Due to Evergrande’s inability to perform its contractual obligations, the agreement was automatically terminated,” the EV maker said today in an announcement it posted on WeChat (in Chinese).
Faraday Future said Evergrande Health was fully aware of its financial status and plans all along. The EV maker said its finance department presented the company’s financial situation and audit reports in a board meeting on November 6 and two Evergrande Health-appointed board members were present.
“The breach of contract on Evergrande Health’s part led to the company’s temporary cash flow problems, however, the production, R&D, supply chain as well as the core teams from other departments are still pushing forward with FF91’s mass production and testing.” Despite the continued dispute with Evergrande Health, Faraday Future said it has already made some “breakthrough progress” in external financing.
Evergrande Health took over the financial commitment made by Season Smart to buy Season Smart’s 45% stake in the troubled EV maker for $860 million agreed in June. The investment saved Faraday Future from running out of cash.
Evergrande Health made a payment of $800 million and then promised to pay an additional $1.2 billion in two installments in 2019 and 2020. In October, FF sought arbitration to terminate the deal and accused Evergrande Health of breaching funding obligations that drove the company into a cash crunch, which resulted in wage cuts and layoffs.