Xpeng’s US$1.5 billion IPO Is The Largest Ever By A Chinese Electric Car Maker In The US

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Xpeng has upsized its US IPO and priced its American depositary receipts above its indicative top-end, that will see the electric vehicle start-up raise nearly US$1.5 billion amid strong investor demand, according to a person familiar with the transaction.This will make Xpeng’s initial public offering the largest by a Chinese electric vehicle start-up in the US, surpassing rival Li Auto, which last month raised US$1.1 billion. Another competitor, NIO, raised US$1 billion in 2018.

Xpeng’s IPO is also the largest flotation by a Chinese company in the US since e-commerce platform Pinduoduo raised US$1.6 billion in July 2018.

The final offer price of US$15 per ADR is well above its indicative range of US$11 to US$13, while the final deal size has been increased to 99.73 million shares from the initially planned 85 million shares. The joint bookrunners include Credit Suisse, JPMorgan, BofA Securities, ABCI, BOC International, Futu, Haitong International and Tiger Brokers.

There is an overallotment option given to the underwriters to sell an additional 14.96 million shares to meet the strong demand from investors.

Trading on the New York Stock Exchange begins on Thursday.

The enthusiastic reception given to Xpeng’s IPO comes amid strong trading performance of NYSE-listed NIO. The shares of the mainland car start-up, seen as a challenger to Tesla, has risen fivefold year-to-date and was quoted at US$20.44 on Wednesday.

Xpeng makes a four-door sports sedan and an SUV under the Xpeng Motors brand in Zhaoqing, Guangdong province and with a contract assembler in Zhengzhou, the capital of Henan province.

Founded in 2015 by entrepreneur and former Alibaba executive He Xiaopeng, the company counts e-commerce giant Alibaba Group Holding, sovereign wealth fund Qatar Investment Authority and smartphone maker Xiaomi as shareholders.

It plans to use the IPO proceeds to strengthen its R&D capability and expand its sales channels. Alibaba owns the South China Morning Post.China’s electric car start-ups are topping up on capital to fuel their fight for market share in the world’s largest vehicle market. While sales have slowed this year amid the Covid-19 outbreak, in July there were signs of recovery, as sales of new energy vehicle ended 12 straight months of decline, rising 19.3 per cent year on year to 98,000 units, according to China Association of Automobile Manufacturers.

The share of electric cars stood at 4.6 per cent of China’s overall passenger vehicle market during the first half, according to Fitch Ratings’ analysts who see a pickup in momentum in the second half.

“China’s new energy vehicle deliveries are likely to resume rising in the second half, driven by an increase in high-end electric vehicle launches by joint venture brands, and Chinese automakers’ promotions for low-end electric vehicles in rural areas with regulatory support,” wrote analysts including Jing Yang and Tyran Kam in a recent report.

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