The embattled Chinese new energy vehicle (NEV) maker WM Motor has inked a non-binding term sheet to sell 100% of its equity to Nasdaq-listed Kaixin Auto after the former’s failed listing attempt that has added to its liquidity crunch.
Shanghai-based WM Motor, whose venture backers include Chinese search engine giant Baidu, inked the term sheet under which Kaixin intends to issue a certain number of new shares to acquire all of WM Motor for an undisclosed transaction amount, Kaixin announced on Monday.
Kaixin believes that WM Motor’s positioning as a fashion brand in the NEV market makes it “a good match” with Kaixin’s strategic development goals.
“Through the intended acquisition, WM Motor will gain access to more capital support to enhance the development of its smart mobility business,” said Mingjun Lin, chairman and CEO of Kaixin, in a statement.
The planned acquisition of WM Motor comes close on the heels of Kaixin’s earlier purchase of Morning Star Auto, a deal that was completed in late August and represented the firm’s official entry into the field of NEV manufacturing.
Kaixin, which operates a dealership network focusing on premium used cars and new car sales in China, launched its NEV division in 2021. It commanded a market cap of just under $60 million on the Nasdaq as on September 12.
Listing struggles
The development came right after Hong Kong-listed Apollo Future Mobility Group walked away from a planned $2.02-billion reverse takeover of WM Motor that could have seen the cash-strapped NEV company float shares on the Hong Kong stock market.
In an exchange filing on September 8, Apollo called off the deal that was first announced in January, citing continued uncertainties in financial market sentiment and post-pandemic, short-term economic recovery. It added that other commercial considerations, as well as geopolitical conflicts, were also among the factors that led to it calling off the deal.
The demise of the Apollo deal ended WM Motor’s latest attempt to tap the public market for liquidity in the face of China’s increasingly cut-throat NEV market competition.
WM Motor originally targeted Shanghai’s tech-focused STAR Market and filed its application for an initial public offering (IPO) in September 2020, but the plan had no substantial progress afterwards.
In June 2022, the firm submitted its IPO prospectus to the Hong Kong stock exchange and hired Haitong International, CMB International, and BOC International as co-sponsors of the planned deal, which, however, ended up nowhere.
Alongside its listing struggles were the past few years of continued losses. WM Motor recorded over 4.1 billion yuan ($562.4 million) in total net losses in the three years from 2019-2021, although its annual revenues grew substantially to 4.7 billion yuan ($644.7 million) in 2021 from 1.8 billion yuan in 2019.
Founded in 2015, WM Motor has developed and delivered four smart NEV models in volume, with the forthcoming delivery of its latest model M7. The firm has sold over 100,000 smart electric passenger cars in about 200 cities in China so far.
Its capabilities range from product design, hardware and software R&D, and supply chain management to vehicle & battery pack manufacturing, digital marketing, and auto financing. WM Motor owns and operates two smart manufacturing factories in Wenzhou and Haunggang in China.
While its current valuation remains unknown, WM Motor was once a darling of private capital investors.
The firm, in December 2021, completed a $152-million Series D2 round led by Agile Property Holdings Ltd, a Hong Kong-listed land developer in southern China’s Guangdong Province.
Its early investors include Hong Kong’s telecom company PCCW and conglomerate Shun Tak, as well as Chinese state-owned automaker SAIC Motor, and the US dollar investment arm of China’s GF Xinde Investment Management.