BYD One Step Closer to Chip Unit IPO

The Hong Kong shares of BYD have skyrocketed 40% this year, hand-in-hand with Tesla's gains.
Oct. 26, 2021 21:02
BYD One Step Closer to Chip Unit IPO

(CapitalWatch, Oct. 26, Hong Kong) BYD Co. Ltd. (OTC: BYDDF; HKEX: 1211) got a step closer to spinning off its chip business ahead of a listing on Shenzhen Stock Exchange's ChiNext board after a halt on the process in August.

The Warren Buffett-backed conglomerate BYD said the Stock Exchange of Hong Kong has greenlighted the spin-off of its semiconductor unit. The next steps for BYD Semiconductor Co. include getting IPO approval from the Shenzhen Stock Exchange and the China Securities Regulatory Commission (CSRC), according to company filing.

The announcement follows the suspension of BYD's application review by the Shenzhen exchange in August amid a regulatory investigation into Tian Yuan Law Firm, an advisor on the IPO.

In fact, along with the halt on BYD Semiconductor's process, about 40 IPOs were postponed in Shanghai and Shenzhen. In addition to the aforementioned law firm, the probe involved China Dragon Securities Co., Carea Assets Appraisal Co., and Zhongxingcai Guanghua Certified Public Accountants LLP.

Bloomberg links the probe to the massive regulatory crackdown in China's private tech sector and the heightened oversight of the capital market at home and abroad, as well as "zero tolerance" on financial fraud.

The outcome of the probe into Tian Yuan has not been publicly announced. On the Chinese version of its website, the agency continues to release news of the successful listings it has assisted, the latest being made on Oct. 19.

Meanwhile, BYD said in its filing that the spin-off of its chip unit will lead "to further improving multi-channel financing ability and brand effect, forming a sustainable competitive advantage by strengthening the resources conformity ability and product research and development capability, making full use of the domestic capital market, seizing market development opportunities, and laying a solid foundation for becoming an efficient, intelligent and integrated new semiconductor supplier."

BYD's chipmaker business is backed by Sequioa Capital China Fund, CICC Capital, and SDIC Fund. Last year, it landed several investments, including pre-IPO and technology-specific funding, as it raced to increase its market share for the insulated gate bipolar transistors (IGBT), dubbed the "CPU of an EV." In addition to cars, IGBT is needed in industrial and consumer electronics. Global Industry Analysts recently predicted the market will reach $8.5 billion globally and $1.9 billion in China for the technology in 2026.

BYD IGBT6.0 chip is expected to launch soon, simultaneously with the opening of the company's R&D center in Xi'an. The chipmaker began operations in 2002 and released its own first IGBT in 2009. It operates factories in Shenzhen, Huizhou, Ningbo, Changsha, and Xi'an.

BYD's shares closed 3% higher on Tuesday in Hong Kong, at HK$311.40 apiece. In the past month, the stock surged 29%, fueled by the company's advancements in Europe, expansion of battery production, strong sales figures, and a promise of an affordable electric SUV in 2022 that would beat Tesla (Nasdaq: TSLA).

Year-to-date, BYD stock is up nearly 40% as EV sector stocks surged in stark contrast to the 5% y-t-d drop of the Hang Seng Index and a 3% gain in SSE Composite. Notably, Tesla is trading a similar 40% higher today compared with its early-January level – thanks to the quick recent gains of over $100 per share since Friday.