Electric-Vehicle Producers and Suppliers Pushed into a Rough IPO Market

Electric car and component manufacturers are making deals, but investors are negotiating difficult transactions.

FREMONT, CA: Asian manufacturers of electric vehicles and the businesses that supply them are scrambling to obtain funds to capitalise on a rise in demand for fuel-efficient cars. EV-related stock transactions have been abundant this year, despite a significant decline in the global market for IPOs. 

According to Dealogic statistics, companies involved in the supply chain for electric vehicles have raised more than USD 23 billion in Asia, excluding Japan, through IPOs and follow-on stock sales.

According to bankers and investors, the booming EV industry is one of the few that is still attracting capital because of its significant long-term development and profit potential. However, the current stock market volatility has not spared the companies; some have been forced to scale back their fundraising goals or accept lower valuations.

Companies involved in EVs, such as automakers and battery manufacturers, are also moving forward with stock sales to finance their capital-intensive operations. According to Jon Withaar, head of Asia special situations at Pictet Asset Management, many companies, particularly those that are unproductive or burning cash, have no alternative.

They require that money to expand and survive. They require that money to be taken seriously in their marketplaces, he continued.

Leapmotor, a seven-year-old Chinese manufacturer of electric vehicles, fell far short of its initial public offering (IPO) goal of USD 1.5 billion in Hong Kong last month, raising only USD 800 million. The company, whose full name is Zhejiang Leapmotor Technology Co., stated that it intended to utilise the money for R&D and increase its production and distribution capacity. By 2025, it plans to release seven new EV vehicles. Leap Motion launched last week on the same day the city's benchmark Hang Seng Index hit an 11-year low; consequently, its shares fell.

Chinese electric car battery supplier CALB Co. began trading in Hong Kong after pricing its initial public offering (IPO) at the low end of its provided range, raising USD 1.3 billion. According to Edward Byun, co-head of equity capital markets for Asia ex-Japan at Goldman Sachs Group Inc, the electric vehicle market is currently at a turning point. He continued, The players want to take advantage of this crucial growth stage by making additional investments involving finance.

Goldman didn't touch Leapmotor and CALB's IPOs. The Wall Street bank earlier this year worked on multi-billion share sales by EV battery goliaths Contemporary Amperex Technology Co., or CATL, of China, and LG Energy Solution Ltd., of South Korea. Both businesses are significant suppliers to Tesla Inc. and other automakers.