BYD shares bounce back after steep plunge over discount placement

BYD shares were back up after taking a tumble yesterday as investors and analysts shrugged off a discounted share sale and factored in the prospects of a higher turnover as the carmaker boosts its capacity with the extra cash.

Shares of the Shenzhen-based carmaker, partly owned by Warren Buffett's Berkshire Hathaway, dropped nearly 9 per cent to a day low of HK$37.50 in the morning before clawing back the losses later in the session. The stock ended the day 0.36 per cent higher at HK$41.30.

BYD had suspended trading on Friday and announced that it had raised HK$4.27 billion by placing 121.9 million shares to no fewer than six individual investors at HK$35 per share - a 14.95 per cent discount to its last closing price.

Berkshire Hathaway, BYD's biggest strategic shareholder that owns 28 per cent of the Hong Kong-listed stock, was not expected to have participated in the share placement because it is not an individual investor.

The initial drop yesterday was mainly triggered by the discount in the placement. But the stock began to regain lost ground in later trading as investors realised the share sale would lower BYD's debt leverage and was positive to its long-term electric vehicle business development, said Olive Xia, an analyst with Core Pacific-Yamaichi.

Net proceeds from the share placement amounted to HK$4.2 billion, which is to be used as general capital and fund business development. BYD has pinned its hopes on new-energy vehicles that it sees as the future of the car industry, according to its filing to the Hong Kong stock exchange on Friday.