EV manufacturer Li Auto plans $1.9 bln

Li Auto, a Meituan-sponsored Chinese electric vehicle company, has set its Hong Kong IPO at HK$150 per share. It is allowing up to US$1.9 billion in proceeds. This amounts to more than the figure raised in its New York IPO a year ago.

Li Auto raised US$1.1 billion on the Nasdaq in July of last year. According to its prospectus, the Beijing start-up intends to offer 100 million shares. The maximum offer price represents a 14.5 per cent premium to its Nasdaq-listed American depositary shares (ADS), which had reached US$33.68 after a four-day winning run.  Each Li Auto ADS is equivalent to two ordinary shares.

If there is substantial demand, there is an overallotment option to sell 15 million extra shares.

The company began trading on Hong Kong’s primary market on August 12 under the ticker 2015. The Hong Kong public offering will start today and conclude on Friday. The final offer price decide based on the cost of American depositary shares.

Li Auto and Xpeng

The Hong Kong IPO comes on the heels of record monthly deliveries from Li Auto and Xpeng in July. Electric car producers position themselves to capitalize on surging sales in the world’s largest EV market. The company sold a total of 8,589 Li-One SUVs. It is the first and sole EV to hit the market, a 251.3% year on year increase and an 11.4 per cent increase over June.

Last month, Xpeng, which lists both the New York and Hong Kong stock exchanges, delivered 8,040 vehicles, a 228 per cent increase year on year and a 22 per cent increase month on month.

Monthly sales of 10,000 units will be crucial to aim for China’s EV start-ups like Xpeng and Li Auto. Because after reaching that level, a carmaker will regard as a significant participant in the automobile market.

Nonetheless, Li Auto’s IPO investors must consider that the company has yet to turn a profit. Li Auto’s net loss increased to 360 million yuan (US$54.9 million) for the three months ending March, up from 77.1 million yuan in the same period last year. Its net loss for the entire 2020 fiscal year was 151.7 million yuan.

Smart-EV makers

According to industry insiders, the three primary Chinese smart-EV firms that can rival Elon Musk’s Tesla on the mainland are Li Auto, Xpeng, and NIO. Xpeng was the first of the three to complete a dual primary offering in Hong Kong last month. They generated a total of US$1.8 billion. NIO, which headquarter is in Shanghai, is largely expected to follow suit.

Shares traded in Hong Kong are fully fungible with those sold in the United States, and Li Auto’s ADS holders can likewise exchange them for shares traded in Hong Kong.

After a slow July in which only 17 deals complete, a successful IPO by Li Auto would re-energize the Hong Kong fundraising market. Collecting only US$2.7 billion, a 62% decrease year on year, according to Refinitiv data. The sale is co-sponsored by Goldman Sachs and CICC, with UBS serving as the financial adviser.

Li Auto intends to invest the net proceeds of its IPO on research and development, including fast-charging technologies, autonomous driving technologies, retail store expansion, and marketing.