Li Auto targets US$1.9 billion in Hong Kong IPO as Chinese electric car sales soar
- Li Auto has set the maximum Hong Kong offer price at HK$150 per share, a 15 per cent premium to its American depositary shares
- If demand is sufficient, Li Auto could raise far more than it did in its New York IPO a year ago
Li Auto, the Chinese electric car maker backed by online delivery giant Meituan, has set the maximum price of its Hong Kong initial public offering at HK$150 (US$19.29) per share, which would enable it to raise up to US$1.9 billion and exceed the amount raised in its New York IPO a year ago.
Last July, Li Auto raised US$1.1 billion on the Nasdaq. The Beijing start-up plans to sell 100 million shares, according to its prospectus. The maximum offer price represents a 14.5 per cent premium to its American depositary shares (ADS) listed on the Nasdaq, after a four-day winning streak lifted them to US$33.68. Each Li Auto ADS represents two ordinary shares.
There is an overallotment option to sell 15 million more shares if there is strong demand.
Li Auto is scheduled to start trading on Hong Kong’s main board on August 12, under the stock code 2015. The Hong Kong public offering will begin today and end on Friday, when the final offer price will also be determined, taking its lead from the American depositary shares price.
“For China’s EV start-ups like Xpeng and Li Auto, monthly sales of 10,000 units will be a meaningful threshold to target because after exceeding that level, a carmaker will be viewed as a powerful player in the automotive industry,” said Gao Shen, an independent analyst in Shanghai.
Still, investors in Li Auto’s IPO would have to weigh the downside that the company is yet to make a profit.
“We have not been profitable since our inception. We may not generate sufficient revenues or [we may] continue to incur substantial losses for a number of reasons, including lack of demand for our vehicles, increasing competition,” it said in its prospectus. Li Auto was founded in 2015.
For the three months ended March, Li Auto’s net loss worsened to 360 million yuan (US$54.9 million), from 77.1 million yuan in the same period a year ago. Its net loss for the full year of 2020 was 151.7 million yuan.
Li Auto, Xpeng and NIO are the three main Chinese smart-EV makers that have the potential to challenge Elon Musk’s Tesla in the mainland, industry observers have said. Xpeng was the first of the trio to complete a dual primary listing in Hong Kong last month, raising US$1.8 billion. Industry players generally expect Shanghai-based NIO to follow suit.
Shares listed in Hong Kong are fully fungible to those listed in the US, and holders of Li Auto’s ADS can also swap them into shares traded in Hong Kong.
A successful IPO by Li Auto would inject momentum into the Hong Kong fundraising market after a quiet July when only 17 deals were completed raising just US$2.7 billion, down 62 per cent year on year, according to data from Refinitiv.
Goldman Sachs and CICC are the joint sponsors of the deal, while UBS is the financial adviser.
Li Auto plans to use the net proceeds from its IPO on research and development, which includes fast- charging technologies, autonomous driving technologies, expanding its retail stores, and marketing.
Author: Georgina Lee, SCMP