Chinese EV maker Li Auto jumps over 50% in Nasdaq debut

Chinese food delivery platform Meituan Dianping-backed electric vehicle maker Li Auto Inc’s stock jumped over 50 per cent following its debut on Nasdaq on Thursday after raising $1.1 billion in its initial public offering (IPO).

 The offering of 95 million American depositary shares (ADS) was priced at $11.50 per share. The stock opened at $15.50 and extended gains to rise as much as $17.50, adding to the growing list of strong debuts this year, Reuters reported.

The $1.1-billion listing is the largest fundraise by a Chinese company on U.S. boards since October 2018, comparable to Tencent Music Entertainment Group’s $1.07 billion that December or Li Auto’s domestic peer NIO’s $1.15-billion IPO offering the same September, according to Refinitiv.

The billion-dollar IPO of the Chinese EV maker comes as an array of US-listed Chinese Internet giants like JD.com and NetEase resorted to a secondary listing in Hong Kong, and more Chinese enterprises started to rethink their fundraising strategies amid a less-welcoming environment for their public offerings on Wall Street.

Apart from the continued geopolitical tensions between Beijing and Washington, the detaching was further escalated by Luckin Coffee’s accounting scandal, which reignited calls to tighten scrutiny on Chinese IPOs in the U.S.

But these are not stopping players in China’s emerging EV market from pursuing a better valuation in a market where investors’ appetite for new-generation vehicles is still growing. NIO, which went public in New York in 2018, has its share price more than tripled so far this year.   

One of Li Auto’s earlier investors, Chinese investment bank Taihecap, even sees the company growing into a $100-billion-worth industry giant in the world’s largest car market.

“… not only because it understands well about the nature of auto consumption, the development of EV industry, but also its persistence on the customer value and the nature of the business, since its foundation,” said Wallace Guo, managing partner of Taihecap.

Taihecap, previously known as TH Capital, was one of the investors in Li Auto’s 3-billion-yuan ($428 million) Series B funding round in March 2018. It also served as the exclusive financial adviser of the investment.

“With the booming of new middle-class families in China, middle-to-large sized SUVs with six to seven seats have inevitably become the first choice for families, because the most important scenario to have a second vehicle in a family is for the whole family trip,” said Guo.

“Second, a new trend of auto consumption upgrade is happening in China, lower-price transportation vehicles are being substituted by larger cars with the price range of 250,000 to 400,000 yuan,” he said.

Li Auto’s vehicle deliveries in the second quarter of 2020 increased by 128 per cent to reach 6,604 from 2,896 in the first quarter, as the average selling price of vehicles remained consistent during the two periods. Its revenues in Q2 stood at 1.9 billion yuan ($275 million), up 128.6 per cent from 851.7 million yuan in Q1.

As of June 30, 2020, the company had over 700 sales and service personnel deployed across 21 retail stores, 18 delivery centres, and 17 servicing centres nationwide.

Asia-based private equity firm Hillhouse Capital indicated an interest in purchasing up to $300 million of stock at the offer price, according to its prospectus.

With the completion of the offering, some of the company’s existing shareholders also agreed to purchase $380 million in new ordinary shares from Li Auto. These shareholders include Meituan Dianping, which will acquire $300 million worth of shares through an affiliate; Bytedance, the owner of short video app TikTok that planned to buy $30 million; as well as Meituan Dianping’s co-founders Wang Xing and Wang Huiwen, who will invest $30 million and $20 million, respectively.

Post the IPO offering, Wang Xing, who has served as a board director of Li Auto since July 2019, will hold a 24 per cent stake in the company, while shares owned by the company founder and CEO Li Xiang will be diluted to 21 per cent from 25.1 per cent. But Li will retain a voting power of 72.7 per cent, compared to Wang at 8.3 per cent.

Li Auto said in the prospectus that it would use most of the proceeds raised for capital expenditures, as well as research and development of new products.

Goldman Sachs, Morgan Stanley, Switzerland-based UBS, and Chinese investment bank CICC were among the underwriters of the deal.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.