The Chinese Billionaire Who Wants to Out-Tesla Tesla

Jia Yueting has all the trappings of a successful Chinese tech entrepreneur with global ambitions.

Jia Yueting
Photographer: Imaginechina via AP Photo

A self-made billionaire who got his start as the IT guy at his local taxation bureau, Jias flagship internet-video company now athletics a $15 billion marketplace capitalization and a buy rating from Goldman Sachs Group Inc. Donning hoodies and t-shirts, he boasts of plans to take over Apple Inc. in smartphones and surpass Tesla Motors Inc. in electric cars. Jias Faraday Future has seduced staff from Ferrari and BMW, and won the backing of Nevadas governor to construct a$ 1 billion auto plant in North Las Vegas — about 400 miles from where Tesla transgressed ground on a giant battery factory in 2014.

Yet for all of Jias accomplishments, the 43 -year-old tycoon has failed to win the confidence of one key man. Dan Schwartz, Nevadas treasurer, says hes skeptical Jia can secure financing for the car plant, a project that needs government is supportive of power line, 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 country bonds for $120 million of infrastructure improvements.

The crux of Schwartzs concern is Jias reliance on equity-backed loans, a financing strategy that could leave Nevada taxpayers vulnerable to the whims of Chinas volatile stock market. Jia has pledged 87 percentage of his holds in Leshi Internet Information& Technology Corp. — his flagship firm — for money that he then plowed back into his companies, regulatory filings demonstrate. The stock, which was halted in Shenzhen for the first five months of 2016, has dropped 11 percentage since it resumed trading on June 3, a move that heightens Schwartzs 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 doesnt generate the billions of dollars hed require. Wheres he going to get the money?

The financing topics surrounding Jias foray into the U.S. electric-car marketplace are becoming more common around the world as China Inc. embarks on an unprecedented overseas shopping spree. The nations 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 gains at home cast doubt over their ability to secure stable funding.

Financing Plans

Faraday, whose 1,000 -horsepower concept car has described comparisons to the Batmobile, tells it has the full support of Nevadas governor and is pushing forward with the city of North Las Vegas on infrastructure planning. The 800 -employee carmaker — a separate company from Leshi thats majority-owned by Jia — has sought to address Schwartzs concerns, but could technically construct the plant without the country bonds, Faraday spokeswoman Stacy Morris said in an e-mailed reply to questions.

Jia has invested more than $300 million of his own fund 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 Jias companies. He said the size of the funding would be meaningful and come from Asian investors, while declining to provide more details.

I dont understand why hes trying to kill these high end jobs in the state of California and Nevada, Cheng said in an interview, referring to Schwartz. It mystifies me.

Goldman Bullish

City, district and regional government agencies are already working with Faraday on infrastructure for the plant, and the Nevada Governors Office of Economic Development has approved funding for employee develop, the GOED said in an e-mailed response to questions from Bloomberg. Tesla — which is named, like Faraday, after a 19 th century innovator in the fields of electricity — declined to comment.

Faraday FFZero1 idea vehicle .
Photographer: David Paul Morris/ Bloomberg