HONG KONG — Chinese electric vehicle maker Li Auto is seeking to raise $1.9 billion through a listing on the Hong Kong Stock Exchange that will give it greater security amid rising capital market tensions between Washington and Beijing.
Li Auto went public only a year ago on the Nasdaq Stock Market, raising $1.1 billion.
Within four months, its share price had more than quadrupled to $47.70 from its offering level of $11.50 amid investor enthusiasm about Chinese EV producers. The stock has been volatile since then, closing Monday at $33.68.
Xpeng Motors, another New York-listed Chinese EV maker, raised $1.8 billion in a Hong Kong offering last month. Nio, the first Chinese EV startup listed in the U.S., is also working on a Hong Kong listing, Nikkei Asia reported last month.
Li Auto, like Xpeng, is seeking a “dual primary” listing in Hong Kong as it is not eligible for the easier secondary listing path taken by most Chinese companies pursuing “homecoming” offerings in the former British colony because of its short history as a public company.
Li Auto recorded a net loss of 151.7 million yuan ($23.47 million) last year on revenue of 9.5 billion yuan, improving from a 2.4 billion yuan net loss on revenue of 284.4 million yuan in 2019.
Li Auto started mass production of its first and the only model so far, the six-seater Li One hybrid SUV, in late 2019. As of last week, it had sold 72,000, positioning its gas-electric hybrid system as a solution to consumer worries about finding charging stations.
The six-year old company said it will use 45% of its IPO proceeds on research and development of battery technologies, autonomous driving systems and new models. A matching amount will be used to fund expansion of production capacity and its sales and service networks as well as marketing and promotion.
Li Auto said it is developing a new vehicle operating system and plans to launch a full-sized premium SUV next year and two other SUV models in 2023. All its new models will be equipped for Level 4 autonomous driving, meaning they can be operated in a fully self-driving mode under certain conditions.
Beijing-based Li Auto said it will issue 100 million shares in Hong Kong at a maximum price of HK$150 each. Of that, 10% will be allotted for retail investors in the city, with the rest available for institutional investors, according to its prospectus submitted to the Hong Kong Stock Exchange.
It expects to announce final pricing on Friday, with trading then to start on Aug. 12. Under an overallotment option, it could issue up to 15 million extra shares, raising total proceeds to as much as 16.9 billion Hong Kong dollars ($2.17 billion).
In recent days, both Beijing and Washington have taken aim at Chinese companies’ New York IPO activity.
Since Didi Global’s $4.4 billion IPO on the New York Stock Exchange on June 30, Beijing has issued a series of edicts tightening restrictions on offshore IPOs.
Beijing’s moves against Didi as well as the private education sector, which includes New York-listed players TAL Education and New Oriental Education & Technology Group, has in turn accelerated U.S. efforts to raise barriers to Chinese listings. The U.S. Securities and Exchange Commission last week announced new disclosure rules for Chinese IPO hopefuls while various congressional proposals would bar any new listings and potentially speed up the delisting of existing stocks.
Under a law enacted last year, Chinese companies risk being kicked off American exchanges by 2023 if U.S. regulators are not permitted to review their audit records. Beijing forbids such reviews on national security grounds.
“With U.S. investors suffering billions of dollars of losses on Didi, TAL, New Oriental, et al., any potential goodwill remaining between the CSRC (China Securities Regulatory Commission) and SEC has evaporated, and the chance of a negotiated settlement on audit supervision is now close to zero,” wrote Gavekal Dragonomoics analyst Thomas Gatley in a client note Tuesday. “Moreover, Congress seems intent on speeding up the expulsion of Chinese companies from U.S. exchanges, and closing all the loopholes.”
Goldman Sachs and China’s CICC are sponsors of Li Auto’s Hong Kong listing. UBS is acting as its financial adviser.