Chinese electric vehicle maker Zhejiang Leapmotor Technology plans to raise $800 million at its Hong Kong initial public offering (IPO). The pricing of the shares is to be HK$48 ($6.12) each. This is less than the original $1.03 billion the EV maker said initially in its regulatory fillings. However, the IPO will be the city’s largest this year.
Initially, the company planned to raise $1.5 billion but had to cut the size after a lukewarm response from investors. The pricing revealed on Sunday is at the bottom of the range of HK$48 to HK$62 a share that Leapmotor has set for the 130.82-million-share deal. Potential investors cut back their orders amid volatility in global financial markets, one source said.
In the United States, the S&P500 dropped 4.7 percent last week as the Federal Reserve raised interest rates and markets remained concerned about high inflation. Hong Kong’s Hang Seng Index fell 4.4 percent, its worst in 10 weeks. Leapmotor, based in Hangzhou, produces four EV models that mainly target China’s middle and lower-end mass market in a 79,500-300,000 yuan ($11,500-$43,000) price range, according to its website and prospectus filed with the Hong Kong Stock Exchange.
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It plans to use the IPO funds for research and development and to boost its production capacity and sales network, according to regulatory filings. Chinese battery maker CALB is raising up to $1.7 billion in an IPO, according to a company statement, in a deal that would eclipse Leapmotor and make it the biggest new share sale in Hong Kong in 2022. Hong Kong IPO volumes have fallen nearly 90% as global markets remain roiled by China’s regulatory uncertainty, rising interest rates, high inflation, and Russia’s war in Ukraine.
Despite the Leapmotor and CALB deals, plus China Vanke’s property services unit Onewo Inc raising $733 million, dealmakers are cautious there will be a solid rebound in new share sales in Hong Kong and overseas before 2023. “It feels that these IPOs are kind of one-off transactions and think the Hong Kong market is not yet fully opened up,” said Shifara Samsudeen, LightStream Research analyst who publishes on Smartkarma. “Most of the deals were downsized,” she said. “There have been long gaps between a hearing approval to pre-marketing and listing, these all suggest that the market is yet to return to normalcy.” Despite the odds, new entrants continue to enter the market. Electric vehicle transformation is being counted on for various market reasons, not just the technology and research and development. Once an industry starts booking the amount of money that flows is huge.