Faraday Future Intelligent Electric Inc. (NASDAQ: FFAI) entered into incremental warrant termination agreements on August 31, 2026, with holders of certain outstanding incremental warrants issued pursuant to a securities purchase agreement dated March 21, 2025. The agreements, filed as Exhibit 10.1 to the company's Form 8-K, result in the cancellation of all outstanding incremental warrants.
The warrants covered under the termination agreements were exercisable for three types of securities: convertible promissory notes with an aggregate principal amount of $21,021,369, shares of the company's Class A common stock, and shares of the company's Series B preferred stock. The company stated that the cancellation permanently removes the potential dilution associated with the future exercise of these warrants.
According to the company, based on the current $5.00 conversion floor price for outstanding convertible notes issued pursuant to the March 2025 financing, the exercise of these warrants could have resulted in approximately 45% of potential maximum dilution. The company noted that, on a fully diluted basis, the cancellation eliminates approximately 57.48% of the potential dilution associated with the March 2025 financing.
The company also reported that these termination agreements, along with an amendment agreement entered into on August 20, 2026, which eliminated the company's obligation to issue common warrants and incremental warrants at future closings, have fully cancelled all common warrants and incremental warrants under the March 2025 securities purchase agreement.
Faraday Future stated that following the second quarter, these two optimization actions are expected to directly reduce approximately $5.794 million in fair-value-measured liabilities disclosed in the company's previously reported second-quarter financial results. The company described this as a meaningful improvement to its balance sheet and liability profile.
Executive Chairman Jerry Wang commented that the incremental warrant termination agreements represent a concrete step in delivering on the company's commitment to capital value restoration and reducing potential dilution.
