Geely’s EV unit Zeekr raises US$441 million at top end of New York IPO price range in biggest Chinese stock offering since 2021

May 10, 2024

25 3 minutes read

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Zeekr Intelligent Technology, the premium electric-vehicle (EV) unit controlled by Hong Kong-listed Geely Automobile, raised about US$441 million (HK$3.4 billion) after upsizing its stock offering in New York following strong demand from global investors.

The Chinese carmaker sold 21 million American depositary shares (ADS) at US$21 each, the top end of the price range of US$18 to US$21, according to two executives briefed on the matter. The company earlier filed to sell 17.5 million ADS, and granted its underwriters an option to sell an additional 2.625 million ADS, according to its regulatory filing on May 3.

The stock is due to start trading on the New York Stock Exchange on Friday. The IPO, which values Zeekr as a whole at US$5.1 billion, is the largest by a Chinese company in the US since Full Truck Alliance raised US$1.6 billion from its New York listing in June 2021, according to exchange data.

The Zeekr MIX on display at the Beijing Auto Show on April 26, 2024. Photo: Bloomberg

“Appetite for leading Chinese EV makers remains strong in the US,” said Cao Hua, a partner at Unity Asset Management, a Shanghai-based private equity firm. “Zeekr’s improved performance in China recently has given investors the confidence to subscribe to the IPO.”

Zeekr, based in Hangzhou in eastern Zhejiang province, increased the IPO size by 20 per cent, according to people involved in the matter. Geely Auto, which indicated it would buy up to US$320 million worth of equity in the offering, will dilute its stake to just above 50 per cent from 54.7 per cent.

Geely established Zeekr in 2021 and started delivering its Zeekr 001 in October 2021 and its second model Zeekr 009 in January 2023 and its compact SUV called Zeekr X in June 2023. Recent additions to its line-up include Zeekr 009 Grand and its multipurpose vehicle Zeekr MIX, both unveiled last month.

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Zeekr’s IPO came amid robust sales this year, mostly in the domestic market. The firm delivered 16,089 units in April, a 24 per cent increase over March. Deliveries in the first four months totalled 49,148 units, 111 per cent surge from the same period last year, according to its IPO filing.

Even so, the carmaker remains unprofitable. It recorded a net loss of 8.26 billion yuan (US$1.1 billion) in 2023 and 7.66 billion yuan in 2022.

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“We estimate our gross profit margin in the first quarter of 2024 to be lower than the fourth quarter of 2023 because of the negative effect from the delivery of new vehicle models as well as change in product mix,” Zeekr said in its US filing. Higher sales of lower-margin businesses like batteries and components could also impact results, it added.

Sales of pure electric and plug-in hybrid cars across mainland China increased 35 per cent to 2.48 million units in the January-to-April period from a year earlier, according to the China Passenger Car Association, amid a price war and concerns about excess capacity in the world’s largest EV market.

Shenzhen-based BYD, the world’s largest EV builder by unit sales, has slashed prices of nearly all of its cars by 5 per cent to 20 per cent since mid-February. Another cut of 10,300 yuan per vehicle by BYD could drive the nation’s EV industry into losses, Goldman Sachs said in a report last month.

Prices for 50 models across a range of brands have dropped by 10 per cent on average as the price war escalated, Goldman added. Zeekr competes with rival producers from Tesla to Nio and Xpeng, and its deliveries this year have surpassed the latter two, according to industry data.

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May 10, 2024

25 3 minutes read