The stock in XPeng Inc. (NYSE: XPEV) dropped as much as 7% by midday Monday after announcing a follow-on offering of 40 million American depositary shares.
Based on Friday’s close of $49.34 per share, the Chinese electric vehicle maker would raise $1.97 billion. According to data from FactSet, the offering represents roughly 5% of XPeng’s outstanding U.S.-listed shares.
Also, the underwriters will be granted a 30-day option to purchase up to an additional six million shares. J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, BofA Securities, Inc., and Citigroup Global Markets Inc. are the joint bookrunners on the deal.
XPeng intends on using the proceeds for the research and development of its EVs and software, sales and marketing, expansion in global markets, as well as general corporate purposes including working capital needs.
The stock fall comes today comes after XPeng’s shares retreated 23% last week. Some analysts cut ratings on the company last week because of valuation concerns.
Also, the U.S. House of Representatives passed legalization last week that could delist Chinese-U.S.-listed firms that refuse to comply with the nation's auditing rules. President Trump could sign the bill into law soon.
With valuations in the EV sector remaining high, fellow Chinese players Nio (NYSE: NIO) and Li Auto (Nasdaq: LI), watched their stocks take hits last week as well.
Last month, XPeng posted more than quadrupled revenue that ran over analysts’ estimates for the third quarter. XPeng delivered 8,578 vehicles in the quarter, up 266% from the same period of the preceding year.
While generating a profit remains an issue for many operating in the EV space, investors see the potential and have been banking on the industry in the long run. Shares of XPeng have accelerated more than 200% to date from its IPO price of $15 in August.