Tianqi Lithium will price its Hong Kong stock sale at the high end of a range, as improving market sentiments buoyed the city’s largest initial public offering (IPO) this year, auguring well for nearly 200 companies waiting in the pipeline to raise funds. Each share of Asia’s second-largest lithium compound producer will be offered at HK$82, which will help Tianqi raise as much as HK$13.5 billion (US$1.7 billion), according to people familiar with the transaction. The stock, trading under the mnemonic 9696, will make its debut in Hong Kong on July 13. There is an overallotment option to sell 24.6 million (389) more shares if there is strong demand, which could increase the total capital raised to almost US$2 billion if the option is fully exercised. Joint sponsors and joint global coordinators CICC, CMB International and Morgan Stanley were not available for comment. Tianqi’s A-shares retraced by 2.3 per cent on Wednesday after soaring to a record 147.17 yuan (US$21.95) a day earlier. Pricing the Hong Kong offer at the top of the HK$69-to-HK$82 range augurs well for Hong Kong’s stock market, which skidded to 10th place during the first half in the worldwide ranking of IPO destinations, as the Covid-19 pandemic combined with rising interest rates and a downbeat market to deter fundraising. Almost 200 companies have applied to raise capital in Hong Kong, awaiting the right moment to kick off their IPOs, said Nicolas Aguzin, chief executive of Hong Kong Exchanges and Clearing Limited (HKEX), during an interview with South China Morning Post last month. Half of the 20 new issuers which have raised funds in Hong Kong during the first half priced their deal at the bottom-end of their marketed range, data from Deloitte shows, as investors’ concern about IPO post-listing performance and growing recession concerns had forced issuers to settle for lower valuations. Tianqi’s H-shares in Hong Kong are not fungible to their A-share counterparts in Shenzhen due to China’s capital control, which means investors cannot exchange one issue for the other. It is not uncommon for A-shares to trade at premiums to their H-share counterparts due to differences in investors’ perception and confidence, analysts said. The Sichuan-based company lined up a strong list of cornerstone investors, who committed to 36.4 per cent of the offering between them. They include LG Chem, Pacific Asset Management, CPIC Investment Management (HK) and Jiangsu-based China Aviation Lithium Battery (CALB), the second-largest EV battery firm in China. Lithium is vital for the production of lithium-ion battery packs, the power source of electric cars and battery-powered devices around the world. The industry is booming, owing to the strong demand for so-called new energy vehicles (NEVs) in China, where three of every five new automobiles are expected to be fully electrified by 2030, according to a UBS forecast. The Chinese battery maker at the forefront of revolutionising EVs Tianqi owns the Yajiang Cuola mine in China, and has a 26 per cent stake in the Greenbushes mine in Australia. The company plans to use up to 70 per cent of the net proceeds from its IPO to repay the US$3.5 billion syndicated loan taken out in 2018 to fund its US$4.1 billion minority stake investment in rival Chilean lithium miner SQM. The SQM transaction has “caused us to bear significant amounts of interest expense and to pay significant amounts of cash for interest,” Tianqi said in its listing prospectus. It will spend the rest of the funds on new production plants and repaying bank loans. “Any decline in lithium prices could materially and adversely affect our business, financial condition and results of operations,” Tianqi said in its prospectus. The average spot prices for battery-grade lithium carbonate in China went through a 42 per cent year-on-year drop in 2020 to US$5,051 per ton, before rebounding to US$13,308 per ton last year.