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China’s electric vehicle sector has begun to tap offshore markets in search of more funding, with shares in EV maker G-Car soaring 34% on Friday in the biggest U.S. IPO by a Chinese company since 2021.
In a sign of improving investor sentiment towards China-linked stocks, the Hangzhou-based luxury car brand spun off from privately held Chinese group Geely Group raised $441 million in a sale of 21 million American depositary shares in New York. Procured. Prices ranged from $18 to $21 and closed at $28.26.
Zeekr debuts in the face of new trade barriers the U.S. and Europe plan to impose on clean technology made in China. The Biden administration is expected to raise tariffs on EV imports from China from 25% to 100% on Tuesday. The European Commission is investigating electric vehicle imports from China and is widely expected to raise tariffs in the coming months.
Investor appetite for Chinese cleantech companies will soon be tested again. Horizon Robotics, the Beijing-based self-driving chip design group that partnered with Volkswagen in 2022, and its rival Black Sesame Technologies both filed prospectuses with the Hong Kong Stock Exchange earlier this year. . CATL, the world’s largest EV battery maker, has vowed to include customers as stakeholders and is gradually selling its stake in Hong Kong.
The outlook for Chinese automakers in Europe and the United States is very uncertain. Officials in Washington and Brussels are torn between needing more Chinese technology to meet climate goals and wanting to block it on national and economic security grounds. There is.
China’s EV industry is highly competitive and continues to grow steadily, with sales increasing by more than 30% in the first four months of this year. In recent weeks, sales of pure EVs and plug-in hybrids have exceeded half of new car sales in China for the first time, underscoring the decline of the industry that produces cars with internal combustion engines.
Zeekr’s listing and the spate of upcoming Chinese EV IPOs also signal a change from the days of tense U.S.-China relations and strict cross-border listing rules that effectively froze China’s IPO pipeline.
Analysts say market conditions for Chinese offshore stocks have improved this year. Hong Kong’s benchmark Hang Seng Index is up 24% from its January lows, while Nasdaq’s Jinlong China Index, which tracks 69 U.S.-listed Chinese companies including EV startups Xpeng, Li Auto and Nio, rose. It’s up more than 20% from January’s lows.
The three EV startups have each had different fortunes since going public. Li Auto’s stock price rose 66%, while Xpeng and Nio are trading below their IPO prices.
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“Given the improved sentiment, there should be greater appetite and demand for Chinese IPOs in growing industries than before,” said Jerry Wu, lead fund manager at Polar Capital China Stars Fund. At the same time, investors will seek lower valuations due to increased competition in China’s auto market and slower EV adoption in Europe and the United States, he added.
That may have been the case with Zeekr, which has struggled to attract interest and postponed its listing since releasing its prospectus last November. That pitch “wasn’t as well-received as this one. You can see that from the following.” [the company’s] Wendy Cheng, senior investment analyst at Hong Kong-based GAM Investments, said: “now [Zeekr has] Good timing and a good story. ”
The IPO values the company at about $5.1 billion, about 60% lower than the $13 billion it was calculated to be worth when it raised $750 million last year. Investors in Cornerstone, which includes Geely’s Hong Kong-listed auto unit, absorbed two-thirds of the shares in the offering. This reduced the number of shares available to investors in the public market, creating a “demand-supply imbalance” and a “positive response” from buyers, said a banker involved in the deal.
Zeekr’s listing is the latest IPO to measure Geely’s success in developing public markets as it moves further into the high-cost business of developing electric vehicles.
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Shares of Geely-owned Volvo, EV brand Polestar, Lotus Technology and ECARX have fallen an average of 60% since their listings.
Analysts say the company’s decision to fund its business through the public markets at such a low valuation comes as the company faces rapid investment demand in electric vehicles, self-driving systems and software in the coming years. Questioning the plan.
Geely declined to comment.
Additional reporting by Andy Lin in Hong Kong
