China's Li Auto Propels Toward $950 Million IPO; Terms Revealed

The maker of battery electric vehicles is set to lift off Friday in an IPO secured by a slew of large banks.
Anna VodJul 25,2020,16:00

Li Auto Inc. has set the terms and the date for its New York IPO worth up to $950 million.

The Chinese maker of electric vehicles plans to sell 95 million American depositary shares in the price range of $8 to $10 apiece, according to its Friday filing with the U.S. SEC.

The Beijing company expects to become publicly traded Friday, July 31, on the Nasdaq Global Market under the symbol "LI."

In addition to the IPO, existing shareholders in Li Auto will acquire a cumulative $380 million in a private placement of shares. These investors are Inspired Elite Investments Ltd. – an affiliate of Meituan Dianping, Bytedance (HK) Ltd. – an affiliate of Bytedance Ltd., Zijin Global Inc., and Kevin Sunny Holding Ltd.

Further, according to the prospectus, Hillhouse Capital has indicated an interest in purchasing up to $300.0 million of Li Auto’s ADSs in the public offering.

Underwriters are Goldman Sachs (Asia) L.L.C., Morgan Stanley & Co. LLC, UBS Securities LLC, and China International Capital Corp. Hong Kong Securities Ltd.; Tiger Brokers (NZ) and SNB Finance Holdings are also co-managing the offering. They may acquire an additional 14.25 million ADSs in Li Auto upon the IPO.

Li Auto makes premium smart electric SUVs for families in China. Its Li ONE model, a six-seater, went into volume production in November 2019 and has sold 10,400 units as of June 30.

The company boasts its cars feature a range extension system, four-display interactive system, full-coverage in-car voice control system, and advanced driver-assistance system, and are competitively priced. The vehicles are sold in the price range of 150,000 yuan to 500,000 yuan (approximately $21,000 to $70,000), the prospectus said.

In 2022, Li Auto said it plans to roll off a full-size premium electric SUV and hopes to develop other models including mid-size and compact SUVs to expand its user base.

Li Auto's manufacturing base is in Changzhou, Jiangsu Province.

The prospectus cited commissioned research by China Insights Consultancy (CIC), saying China's new energy vehicle (NEV) buyers prefer battery-powered vehicles. Battery electric vehicles (BEVs) comprised 81.3% of all NEVs sold in China last year, the CIC reported. However, setbacks remain in the form of limited charging stations for such cars in China, while widely-used lithium-ion batteries are costly. Li Auto aims to provide a solution – its proprietary extended-range electric vehicles (EREV) technology. Its cars are electric-driven by electric motors, but their energy source and power come from both a battery pack and range extension system. Their energy can be replenished by slow charging, fast charging, and refueling.

For the first quarter, Li Auto posted revenues of $120.3 million on losses of $10.9 million. In 2019, it generated $40.2 million in revenues from nil in 2018 on losses of $344.4 million.

Li Auto said it intends to use half of the proceeds for capital expenditures, estimating it will spend about $1.5 billion over the next three years. A 40% portion of the capital will fund research and development of new products and the rest will be used for general corporate purposes, the filing said.

Li Auto follows in the footsteps of Nio Inc. (NYSE: NIO), a Chinese electric car startup which completed its $1 billion IPO on Wall Street in September 2018. Set off at $6.26 per American depositary share, NIO stock has seen significant ups and downs, trading as low as $1.19 in late 2019 and soaring just under $15 per share earlier this month. On Friday, news of its rival’s approach of public trading, NIO shares slipped 3% to $11.82 apiece.