The Chinese billionaire who wants to out-Tesla Tesla
Jia Yueting has all the trappings of a successful Chinese tech entrepreneur with global ambitions.
A self-made billionaire who got his start as the IT guy at his local tax bureau, Jia’s flagship internet-video company now sports a $15 billion market capitalization and a buy rating from Goldman Sachs Group Inc. Donning hoodies and t-shirts, he boasts of plans to take on Apple Inc. in smartphones and surpass Tesla Motors Inc. in electric cars. Jia’s Faraday Future has lured staff from Ferrari and BMW, and won the backing of Nevada’s governor to construct a $1 billion auto plant in North Las Vegas — about 400 miles from where Tesla broke ground on a giant battery factory in 2014.
Yet for all of Jia’s accomplishments, the 43-year-old tycoon has failed to win the confidence of one key man. Dan Schwartz, Nevada’s treasurer, says he’s skeptical Jia can secure financing for the car plant, a project that needs government support for power lines, water mains and roads. Schwartz, the former CEO of a private-equity research firm in Hong Kong, wants more transparency on the funding before signing off on state bonds for $120 million of infrastructure improvements.
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The crux of Schwartz’s concern is Jia’s reliance on equity-backed loans, a financing strategy that could leave Nevada taxpayers vulnerable to the whims of China’s volatile stock market. Jia has pledged 87 percent of his holdings in Leshi Internet Information & Technology Corp. — his flagship firm — for cash that he then plowed back into his companies, regulatory filings show. The stock, which was halted in Shenzhen for the first five months of 2016, has dropped 11 percent since it resumed trading on June 3, a move that heightens Schwartz’s fear that a margin call could prevent Jia from funding the plant.
“You can see where this leads,” Schwartz said in a phone interview. “His Internet company is successful, but that doesn’t generate the billions of dollars he’d need. Where’s he going to get the money?’’
The financing questions surrounding Jia’s foray into the U.S. electric-car market are becoming more common around the world as China Inc. embarks on an unprecedented overseas shopping spree. The nation’s firms, which boosted outbound direct investment by 62 percent in January-May from a year earlier, are branching out even as rising debt levels and weak profits at home cast doubt over their ability to secure stable funding.
Financing Plans
Faraday, whose 1,000-horsepower concept car has drawn comparisons to the Batmobile, says it has the full support of Nevada’s governor and is pushing forward with the city of North Las Vegas on infrastructure planning. The 800-employee carmaker — a separate company from Leshi that’s majority-owned by Jia — has sought to address Schwartz’s concerns, but could “technically” build the plant without the state bonds, Faraday spokeswoman Stacy Morris said in an e-mailed reply to questions.
Jia has invested more than $300 million of his own money into Faraday and the firm will announce a round of outside funding within weeks, said Winston Cheng, a former Bank of America Corp. investment banker who now runs corporate finance for Jia’s companies. He said the size of the funding would be “meaningful” and come from Asian investors, while declining to provide more details.
“I don’t understand why he’s trying to kill these high end jobs in the state of California and Nevada,” Cheng said in an interview, referring to Schwartz. “It baffles me.”
