News in the electric vehicle world has the Faraday Future company looking at an IPO as the sector becomes white-hot after massive Tesla advances and more.
Reuters reports today Faraday hopes to use a merger with a company called Property Solutions Acquisition Group to put together a collective IPO worth $3.4 billion.
One of the big backers in $775 million of investment funding may be none other than Zhejiang Geely, according to the Reuters reports. Last week, we talked about Geely working with massive Chinese retailer Tencent to create advanced driver assistance systems (ADAS) for electric vehicles.
So the new Faraday Future project would indirectly link Tencent to an international group of like-minded investors, which shouldn’t be a problem, given that Treasury Secretary Stephen Mnuchin rebuffed attempts by others in the outgoing Trump administration to blacklist Tencent from American business ventures. However, geopolitical considerations apparently persist in some form.
“Significant Chinese involvement could be an early policy test for U.S. President Joe Biden’s new administration, given escalating concerns in Washington over national security implications of China’s technological ascendance,” writes a Reuters staff author, noting a possible Faraday plan to manufacture in China.
But wait – what does a company like Property Solutions Acquisitions Group do, anyway?
It’s simple – PSAC is an SPAC.
A special purpose acquisition company, as pointed out by experts, is a company that helps other companies to go public without the undue paperwork of an IPO.
“Although SPACs have been used for decades as alternative investment vehicles, they have recently come into vogue as seasoned investors and management teams have turned to SPACs to mitigate the increased market volatility risk of traditional IPOs,” write analyst authors at Deloitte. “2020 has been a record-breaking year for SPAC IPOs. This surge has been driven by the influx of high-profile investors and management teams entering the SPAC space, coupled with an abundance of uninvested capital that had largely been sitting out the first half of 2020.”
The SPAC is essentially a shell company that goes public itself, before merging with the company that originally intended to go public.
News venues like NPR show how celebrity projects and others utilize SPACs for this kind of purpose.
PSAC is ahead of the curve, in that it already went public this past summer.
Traders expect the Faraday Future merged entity will go forth under the ticker FFIE.
