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Xpeng, a Chinese rival to Tesla, is looking for $1.8 Billion from its second initial public offering in less than a year.
Xpeng, the electric vehicle manufacturer based in Guangzhou, China, with offices in Mountain View, Calif., has been listed on the New York Stock Exchange since last August. Its initial public offering in Hong Kong, though, is set for July 7.
In the world automotive markets, Xpeng is a formidable Tesla rival. For example: its P5 sedan, a self-driving car launched in April, undercuts Tesla on pricing in the Chinese market. Tesla there offers the Model 3 for 249,900 yuan ($38,704). Xpeng offers the P7 starting at 229,900 ($35,192).
Trading in Hong Kong on shares in XPeng will start at HK$165, a figure designed to help it raise HK$14 billion (US$1.8 billion). The share price was set tentatively on Tuesday, as a “guidance price,” then confirmed Wednesday in a filing with the Hong Kong exchange.
This will make XPeng the biggest ever dual-primary listing by a U.S. listed Chinese concern.
HK $165 (US$21.25) represents a small discount to the current price of Xpeng on the NYSE (XPEV). Its price has risen steadily through the month of June from US$33 to US$44.
Part of a Trend
Xpeng is joining a trend. Several Chinese firms traded in the United States have recently IPO-ed in Hong Kong. Such a global offering creates a hedge in the event a firm is kicked off the U.S. exchange and, of course, it broadens the investor base.
Alibaba Group Holdings, the e-commerce giant, kicked off this trend in late 2019. It priced its shares at HK$176 (US$22.50) and they surged immediately when trading opened. Trip.com Group Ltd. has done likewise, raising $1.2 billion in its second listing in April of this year.
There is a distinction, though, between a dual primary listing, and a primary/secondary listing. If an issuer has been trading in New York for more than two years, and then holds a second IPO in Hong Kong, the HK listing is secondary, as is the case with Alibaba. But if there is a shorter distance in the timing of the two events, they are dual primary, as with Xpeng.
Secondary listings often allow for less stringent reporting requirements than primary listings. By going the dual-primary route, Xpeng is incurring some costs in order to preserve separate share registries and identities for its China and U.S. operations, which can translate to greater operational flexibility.
Xpeng is the first Chinese EV maker to complete a dual listing. But it won’t be the last. Both Nio Inc. and Li Auto Inc. are planning HK listings soon, Bloomberg has reported.
Troubles in the EV Market
Not all is rosy for EV manufacturers as a group. The legacy automakers have rallied, expanding their own EV programs within their already-established brands. There is a global semi-conductor supply issue. The pandemic-induced lockdowns caused automakers, EV or legacy, to cut their orders for parts. That meant that the chip manufacturers shifted their production, largely to things homebound consumers use, including chips for webcams and laptops.
Snapping back to the old normal, getting those chips manufactured for and sent to automakers again, is proving a challenge. There is also a general wariness among many investors about risky assets.
Given the state of the market, and the fact that Xpeng has not yet earned a profit it needs a war chest. Equity investors are signing on to provide that. Obviously the risks are high. But if Xpeng does emerge as a profitable and top-tier EV maker of a global scale the rewards will be commensurate with the risks.