Exclusive: Chinese EV trio eye HK listings this year to raise combined $5 billion – sources

Date: 09 March 2021

 

Author(s): Julie Zhu, Scott Murdoch, Yilei Sun

Source: Reuters

 

 

According to people with direct knowledge of the matter, the U.S.-listed Chinese electric vehicle (EV) makers trio—Li Auto Inc, Nio Inc and Xpeng Inc—plan to list in Hong Kong as soon as this year in order to tap a growing investor base that is closer to home.

 

The trio each aim to sell as last 5% of enlarged share capital in the Asian hub, said the same people. Based on their New York market capitalisation on Monday, proceeds could reach up to $5 billion.

 

The companies have been working with advisors on the sales which could begin as early as mid-year, said one of the people, who declined to be identified due to confidentiality constraints.

 

Li Auto, Nio and Xpeng, which have raised $14.7 billion in U.S. markets since 2018, declined to comment on the matter. U.S.-listed shares of the three automakers rose between 3.7% and 5.3% in early deals.

 

The plans come as the trio increase capital raising efforts to fund technology development and expand sales networks to better compete in the world’s biggest EV market where U.S. peer Tesla Inc is boosting sales of its China-made vehicles.

 

Year 2021 is set to be a crucial year for EV makers to capture market share as the industry expects China sales of new-energy vehicles (NEVs) to jump almost 40% from last year to 1.8 million units.

 

“Despite much richer financial resources now compared with a year ago, EV start-ups still need to invest heavily in next-generation technology,” said analyst Shi Ji at Haitong International. “Exploring a secondary listing much closer to their home market, if any, is a good move.”

 

Selling shares in Hong Kong would also add the trio to a group of New York-listed Chinese firms seeking a presence on more local exchanges amid Sino-U.S. political tension.

 

The rising number of such listings “has enhanced the status of Hong Kong’s capital markets globally, and also helped issuers reach higher valuations and raise more capital,” said Zhang Zihua, chief investment officer at Beijing Yunyi Asset.

  

TRACK RECORD

 

Under Hong Kong rules, a secondary listing requires at least two financial years of good regulatory compliance on another qualifying exchange.

 

Li Auto and Xpeng went public in the United States mid-last year and so, will likely apply for a dual primary listing in Hong Kong, said three people with direct knowledge of the matter.

 

Per Hong Kong’s dual primary listing rules, firms are subject to full bourse requirements in Hong Kong and a second exchange, but are not bound by the two-year condition.

 

Xpeng is also considering a third listing on Shanghai’s STAR Market for new-economy firms, said two other people.

 

“In the long run, it’s helpful for consumer-focused companies like us to connect with domestic capital markets and domestic investors,” Xpeng President Brian Gu told Reuters last week, declining to comment on any Hong Kong listing plan.

 

“This is the direction we should pay attention to.”

 

GOING GREEN

 

China’s government has been heavily promoting NEVs such as battery-powered, plug-in petrol-electric hybrid and hydrogen fuel cell cars in response to chronic air pollution, spurring interest from technology companies and investors alike.

 

Last month, Reuters reported telecommunications firm Huawei Technologies Co Ltd plans to market EVs as early as this year.

 

China forecasts NEVs will make up 20% of its annual auto sales by 2025 from around 5% in 2020.

 

Domestic vehicle deliveries last year totalled 32,624 by Li Auto, 43,728 by Nio and 27,041 by Xpeng. These figures are compared with the 147,445 vehicles Tesla delivered, according to industry data.

 

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