Jia Yueting and Xu Jiayin are fighting each other. Who will win in the end depends on who is the chess player behind the scenes.

Xu Jiayin: Jia Yueting is spending money recklessly and not doing anything, and he also wants to kick us out.

Jia Yueting: Evergrande not only refuses to pay us, but also wants to seize our intellectual property rights and Chinese branches.

Show affection and you will die soon. So far, after 120 days, the story of Jia Yueting and Xu Jiayin began to slide from sweetness to disputes, and fell into a Rashomon where each side sang its own tune and blew its own trumpet, and it was difficult to distinguish the truth from the false.

The only clear thread in the dispute is that four months after Evergrande acquired a stake in the company, Jia Yueting and his FF had burned through $800 million in financing.

After failing to ask Evergrande to provide additional funds in advance, FF filed an arbitration with the court, demanding that Evergrande be deprived of the right to consent to financing and terminate all previously signed cooperation agreements.

If Jia Yueting's request is supported by the court, Evergrande's shares will be arbitrarily diluted. In simple terms, all of Boss Xu's money will be wasted.

Judging from the two public statements from both parties, the direct focus of the dispute is whether the conditions for additional funds have been met, but the root cause lies in the distrust between the two parties - Evergrande questioned Jia Yueting's management ability, while Jia Yueting has always been wary of Evergrande squeezing him dry and kicking him out.

Origin of the dispute: from equity to voting rights

In June 2018, Evergrande Health, a subsidiary of Evergrande Group, acquired 100% of the shares of Hong Kong Shiying Company for HK$6.7467 billion. Shiying Company holds 45% of the shares of Smart King Company. Smart King Company is a joint venture between Jia Yueting's car manufacturing company FF and Shiying.

The original shareholders of FF Company held 33% of Smart King's shares with FF Company's investment, and the remaining 22% was reserved for employees. Under this structure, Smart King holds all the shares of "FF USA" and "FF Hong Kong". After Evergrande Health took over, it became the largest shareholder of the new car company Smart King.

According to Evergrande's commitment, in order to obtain a 45% stake, subsidiary Shiying needs to invest $2 billion in Smart King in the next three years, paying $800 million by the end of 2018, $600 million in 2019, and $600 million in 2020.

Although Evergrande is the largest shareholder of the new FF company, Jia Yueting obtained 88% of the voting rights of the new company through the AB share system (the A shares held by Jia Yueting have special voting rights of one vote equal to ten votes, and the B shares held by others have only one vote per share).

Of course, Boss Xu is not stupid. There is a bet agreement between Evergrande and Jia Yueting. If the management team led by Jia Yueting fails to achieve the mass production target in the first quarter of 2019, and the original shareholders of FF cannot remedy this breach of contract, then all the company's shares will be transferred to Shiying Company.

Xu Jiayin's call for Jia Yueting is just a short-term investment

Evergrande entered the field of new energy vehicles because the good days of real estate are gone. Xu Jiayin's goal is to complete the transformation before the end of the market. Maybe "transformation" is just a way to die, but Xu Jiayin, who has a strong gambling nature, will never choose to sit and wait for death.

"Transformation" is a long-term strategy, and the recent IPO boom has provided inspiration for Mr. Xu's short-term strategy.

We can help Mr. Xu calculate this account from the perspective of the financial market.

NIO, which just went public in September, currently has a market value of more than 6 billion US dollars. Although Li Bin is more experienced in the automotive industry than Jia Yueting and Xu Jiayin, everyone knows that the new energy vehicle business is actually driven by policies. Jia Yueting has indeed consumed a lot of credit in the past few years, but with the endorsement of Boss Xu, coupled with people's superstition about the "generation of heroes" and his own PPT skills, it is not impossible for FF to go public and even have a market value exceeding NIO.

NIO started mass production in June 2018 and will be available in September. If FF can achieve mass production on schedule, it should be able to be listed in 2019. From a financial perspective, such short-term gains are also quite good.

With the lesson of Sun Hongbin, a real estate colleague, Boss Xu is extremely cautious, and the cooperation agreement basically ensures that he is invincible. If Jia Yueting can make electric cars as planned, then Boss Xu, as a major shareholder, will naturally share the benefits; if Jia Yueting is just talking but not doing, then Boss Xu can control FF at a price of US$800 million, which is also a very cost-effective price.  

With this seemingly perfect plan, Xu Jiayin is also constantly building momentum for FF.

On August 14, Evergrande Faraday Future Intelligent Automobile (China) Group was officially unveiled. The company was registered by Evergrande Faraday Future (Hong Kong) Co., Ltd. with a registered capital of US$2 billion, serving as the operating entity for Faraday Future's technology research and development and production and operation management in China.

On the same day, Peng Jianjun, Vice Chairman of Evergrande Health and Chairman of Evergrande Faraday Future Intelligent Automobile (China) Group, also announced the strategic plan for the next ten years: plans to build five R&D and production bases in East China, West China, South China, North China and Central China. In ten years, the annual production capacity is planned to reach 5 million vehicles, and a variety of models will be available to cover high-end, mid-range and entry-level.

The pain of mass production of Jia Yueting, the PPT master

The mass production target of new energy vehicles will always be a pain in the hearts of PPT masters.

You can see that NIO, which just went public, is currently far away from its set mass production schedule. Musk, who has nearly 10 years of experience in car manufacturing, has also suffered a lot in the "production hell" of Model 3 and has repeatedly missed production targets.

Jia Yueting, who has an accounting background, is no exception. At this point in time, Jia Yueting's risky move is a stress response to the difficulty in achieving the mass production target in the first quarter of 2019.

On August 28, 2018, the first pre-production car of FF91 rolled off the assembly line in the United States. On September 19, the car was shipped back to the Los Angeles headquarters from the Arizona test site.

After pre-production, the vehicle will need to go through a series of process verification, pre-trial production, and trial production before it can be officially put into production.

Based on the production experience of new energy vehicles, such a progress makes it difficult to achieve the goal of mass production by the end of 2018. The production target for the first quarter of 2019, which is related to Jia Yueting's control, is naturally out of the question. The battery failure and fire of FF91, the behavior of defaulting on payments to suppliers and the layoff plan all show that FF has product quality control problems under the financial constraints.

It is hard to say that Jia Yueting's attack on Xu Jiayin was a rational move.

In any case, it is difficult for Jia Yueting to find a suitable new financial backer under FF's current production situation. Basically, no investor will invest in a person who has betrayed his promise twice in a row. Therefore, the biggest possibility is that Jia Yueting instinctively rejects Evergrande, which covets control and is pressing forward step by step.

Evergrande has completed the layout of new energy vehicle production and sales by building a factory in Nansha District, Guangzhou and acquiring Guanghui Auto. Even though Jia Yueting can still control FF, as Evergrande's management team in FF gradually becomes familiar with the car manufacturing business. In the future, if Jia Yueting's behavior slightly disobeys Boss Xu's wishes, Evergrande can always get rid of Jia and go it alone. Previously, Evergrande's request for FF's Beijing team to move to Guangzhou after the capital injection was fiercely opposed.

Although these old subordinates who had followed Jia Yueting since the LeEco Holdings period finally stayed in Beijing, Evergrande still controlled Faraday's Chinese company, which was enough to compete with the American company controlled by Jia Yueting.

Who will win in the end?

One was a speculator, the other was desperate. The fact that this combination lasted four months before breaking up was considered a great deal of face for each other.

Both parties are masters of the game, and neither is easy to deal with. Jia Yueting tricked real estate tycoon Sun Hongbin a year ago. Evergrande Football Team has also staged a breach of contract incident. In the 2015 Asian Champions League final, it decisively tore up the contract with Dongfeng Nissan and replaced the chest advertisement with "Evergrande Life Insurance." It became an international joke and was despised by people all over the world for a long time.

Judging from the paper strength comparison, Xu Jiayin is far superior to Jia Yueting. However, Jia Yueting's bargaining chip is that his management team controls the production progress of new energy vehicles, which can be used as a bargaining chip in negotiations.

Xu Jiayin chose to cooperate with Jia Yueting because he wanted to own a new energy vehicle company that he had deep control over. In addition to the listed NIO, there are many emerging car companies in China, such as CHJ Automotive, WM Motor and Byton. However, those companies can only be used as financial investment targets for Xu.

On the other hand, if he builds a team from scratch, Boss Xu will not be short of money, but it will take several years to develop to the point where he can go public. During these years, the risk of a sharp drop in the company's valuation due to the global financial and economic market downturn must be considered.

From a rational perspective, Jia Yueting's threat to arbitrate is a gamble that Xu Jiayin can't afford to delay. The median and average duration of arbitration at the Hong Kong International Arbitration Center is more than one year. If FF's production and operations are affected during this period, the IPO will be even further away. This is obviously not what Xu Jiayin wants to see.

But Jia Yueting's move is extremely risky. If this angers Xu Jiayin, Evergrande may well use its new energy vehicle layout in China to set up a new company. Although the Guangzhou factory is far from being completed, Evergrande can follow NIO's example and find a traditional car company willing to do OEM for it. In this case, Jia Yueting may never be able to make a comeback in the capital market.

Mantis vs. Centipede, who will win? Maybe we need to see who the real chess player is behind it!

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.