Chinese EV giant BYD seeks US$3.9 billion from Hong Kong stock placement

Company plans to place 133 million new shares at HK$225, or a 7.8 per cent discount on the closing price on Wednesday of its current stock
It will use the cash to replenish its working capital, repay interest bearing debt and invest in R&D

Electric & new energy vehicles

Pearl Liu

Published: 1:49pm, 21 Jan 2021

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BYD, China’s largest carmaker, plans to raise HK$29.9 billion (US$3.9 billion) from the sale of new shares in Hong Kong.

The electric vehicle (EV) maker, which is listed in Hong Kong as well as Shenzhen, said in a filing to the city’s stock exchange on Thursday that it plans to place 133 million new shares at HK$225, or a 7.8 per cent discount on the closing price on Wednesday of its current stock. The new shares will account for 14.5 per cent of its existing shares currently traded in Hong Kong, and 4.88 per cent of its total share capital.

“The company will achieve an accelerated replacement of fuel vehicles by new energy vehicles through technological innovation, as well as a leap from traditional vehicles to smart vehicles through its software and hardware enhancements in the field of automotive intelligence,” Shenzhen-based BYD said in its filing. “The company will continue to increase its production capacity of power batteries, and promote the output of Chinese power batteries to global carmakers.”

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The share sale comes as Beijing pushes for more green vehicles on China’s roads. It wants one in every five new cars to be either purely electric, hybrid or fuel-cell powered by 2025, according to a development plan for new energy vehicles (NEVs) between this year and 2035. China is the world’s largest market for NEVs. Their sales defied a slump in consumption and depressed sentiment caused by the coronavirus pandemic to rise by 12 per cent to 1.2 million units last year.

BYD is also the world’s fourth-largest carmaker by market value, according to China Merchants Securities, and trails only Tesla, Toyota and Audi. Its shares rose by more than 430 per cent last year in Hong Kong, and by 330 per cent in Shenzhen.

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Net gains from the share placement will amount to about HK$29.8 billion, and BYD plans to use the cash to replenish its working capital, repay interest bearing debt and invest in research and development, according to its filing.

The placement comes as a slew of listed companies’ shareholders rush to raise funds through secondary offerings and the sales of new shares amid a flush of liquidity that has driven the Hang Seng Index about 2,800 points higher this year.

Bankers expect a strong pipeline for initial public offerings this year will lead to more capital flowing into Hong Kong. This, in turn, should encourage listed companies to launch stock offerings, especially if their shares soar in value on the back of the money flooding in.

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BYD sold a total of 189,689 next-generation cars last year, down 17.4 per cent from the same period in 2019, the company said in a filing with the Shenzhen Stock Exchange this month. It also faces a mounting challenge from home-grown EV start-ups such as NIO, Xpeng, WM Motor Technology and Li Auto.

The industry has also been made more competitive by Tesla, which is now manufacturing two models at its US$2 billion Gigafactory in Shanghai. The company, which is owned by Elon Musk, the world’s richest man, sold about 500,000 cars worldwide last year.

This article appeared in the South China Morning Post print edition as: Carmaker BYD seeks HK$29.9b in placement