Chinese EV maker Leapmotor to price Hong Kong IPO, aims to raise up to US$1 billion while braving shaky market

The IPO price range will be between HK$48 and HK$62 each, with five cornerstone investors buying US$308 million worth of shares, according to a filing
Leapmotor faces a less welcoming market than the three Chinese EV makers that preceded it with Hong Kong listings, analysts say

IPO

Mia Castagnone

Published: 12:44pm, 20 Sep, 2022

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Chinese electric-vehicle (EV) maker Zhejiang Leapmotor has set the share price range and revealed cornerstone investors for its initial public offering (IPO) in Hong Kong, which could raise as much as HK$8.1 billion (US$1.03 billion) from new investors.

The company is aiming to price 130.82 million shares in the offering at HK$48 to HK$62 each, an exchange filing on Tuesday showed. It is expected to determine the final price on September 23 and start trading on September 29, according to the indicative timetable.

The filing reveals five cornerstone investors, including Zhejiang and Jinhua industrial funds, who will buy up a combined stake worth about US$308 million.

The IPO comes as market sentiment has taken a dive amid growing concerns of a recession following a series of interest-rate increases by the US Federal Reserve, including another anticipated hike this week.

Robotic arms work on the assembly line of the T03 electric car at a factory of Chinese EV startup Leapmotor on July 20, 2022 in the Zhejiang province city of Jinhua. Photo: Getty Images

“I don’t think the investor sentiment is strong given the global market, including Hong Kong, has been [continuously] dropping,” said Kenny Wen, head of investment strategy at Hong Kong-based broker KGI Asia.

Leapmotor had hoped to raise up to US$1.5 billion, the Post reported last month.

“The market sentiment for the industry is not as good as a few months ago, especially when Buffett sold some of [his stake] in BYD,” said Kenny Ng Lai-yin, a strategist at Everbright Securities International, referring to Warren Buffett’s investment firm Berkshire Hathaway trimming its stake in China’s largest electric-car maker at the end of August.

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Leapmotor has a valuation of around US$7.6 billion, which should make its IPO attractive to investors, Ng said.

If successful, Leapmotor will be the fourth Chinese EV maker to list in Hong Kong in the past 18 months. Li Auto and Xpeng raised US$1.7 billion and US$2.1 billion in August and June 2021, respectively, according to Refinitiv data, and Nio listed in Hong Kong in March by way of introduction, which did not entail any fundraising. All three companies are also listed in New York.

Leapmotor targets the low to mid-end of the EV market, with models ranging from 150,000 yuan to 300,000 yuan (US$21,900 to US$43,800). The company delivered over 43,000 vehicles last year. It introduced its first mass-produced model, the S01, in 2019, followed by the mini car T03 in May 2020 and the C11 SUV in October.

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The company has seven models in the pipeline for release by 2025, at a pace of one to three models every year, covering sedans, sport utility vehicles and multipurpose vehicles, the company said in its filing.

Leapmotor’s IPO comes after China Vanke, the nation’s third-biggest property developer by sales, announced it seeks to raise as much as US$784 million by selling 116.7 million shares in its unit Onewo Inc, according to a stock exchange filing on Monday.

Onewo has attracted six cornerstone investors including Temasek Holdings and hedge funds managed by UBS Group to the IPO by its property services unit in Hong Kong.

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“The IPOs of Leapmotor and Vanke will help improve the IPO market, but in my opinion, the sentiment of the IPO will be mostly relative to the stock market performance,” said Ng.

Earlier this month, sources familiar with the deal said Onewo had aimed to raise US$1.5 billion. The lower official target of US$784 million comes as China’s property sector spirals deeper into the abyss, with the country’s biggest developers’ earnings plummeting amid the downturn.

Other cornerstone investors in the Leapmotor IPO include Jinkai Leading Fund, GF Fund and Kwok Tai East.

Cornerstone investors have committed to taking up 33.7 per cent of IPO shares, or 3.8 per cent of the company’s equity, assuming the shares are priced at the midpoint of HK$55 each, before any additional share placements during the offering.

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