Property Solutions Acquisition Corp. (PSAC) Shares Soar Over 20% Amid Reports of a Possible Merger With the Troubled EV Manufacturer Faraday Future – This Tie-up Is Not Without Substantial Risks
Property Solutions Acquisition Corp. (NASDAQ:PSAC), a Special Purpose Acquisition Company (SPAC), is one of the top outperformers among US equities today. As an illustration, the stock is up over 20 percent, currently trading at the $12.23 price level.
So, what has spurred this substantial rally in Property Solutions shares? Well, Bloomberg published a report over the weekend, alluding to the SPAC’s possible merger with the EV manufacturer Faraday Futures – formally known as Faraday & Futures Inc. As is evident from its name, the SPAC was constituted to merge with a private firm in the real-estate sector. However, it seems that Property Solutions has abandoned those plans in order to delve into the frothy EV sphere. Faraday currently has only a single product – the FF91 EV. Characterized by its spacious interior and three electric motors, the FF91 boasts of 1,050 horsepower and a 0-60 acceleration in 2.9 seconds. While a range of 300 miles should allow the EV to hold its head above the industry’s choppy waters, it is not an astounding achievement when Tesla (NASDAQ:TSLA) and NIO (NYSE:NIO) are already debuting their offerings with a 600-mile plus range. On the whole, the FF91 would have been a compelling product in 2017-2018. Now, with the addition of new competition, the EV struggles to stand apart. Nonetheless, should this merger achieve closure, the combined company is expected to be worth around $3 billion.
Readers should note though that there is currently no guarantee that a Definitive Agreement (DA) would materialize. Moreover, Faraday’s checkered past adds another layer of caution for investors thinking of gaining exposure to the shares of Property Solutions. As an illustration, Faraday was forced to halt the construction of its $1 billion plant in Nevada in 2016 owing to a payment dispute with the contractor AECOM and the attendant liquidity concerns. In 2019, the Chinese startup was forced to file for bankruptcy after its founder, Jia Yueting, racked up a whopping $3.2 billion in personal debt. In the ensuing settlement, Jia transferred his stake in Faraday Future to a creditors’ trust while still remaining an employee of the company he founded.
Given the sizable baggage that Faraday Future brings to the table, Property Solutions investors should recognize the heightened risks involved in this tie-up and the attendant need for thorough due diligence. Nonetheless, this is not the first bankrupt EV company to merge with a SPAC in recent times. Fisker (NYSE:FSR) was able to successfully merge with Spartan Acquisition in 2020. Even though Fisker had gone bust in 2013, its latest iteration is off to a solid start, having already secured an expansive partnership with Magna International for the manufacturing of its Ocean SUV.