Xpeng Pulls off Largest Electric Car IPO

Credit: China Visual Group

BEIJING, August 27 (TMTPost) Alibaba-backed Chinese electric car start-up Xpeng Inc. started selling American depository shares on New York Stock Exchange on Thursday, launched the largest IPO ever in the electric car sector against the backdrop of escalating U.S.-China tensions.

The issue price was set at US$15 per share, well above the initial price range of US$11 to US$13. Xpeng Inc., one of three major electric automakers in China, will sell 99.7 million shares to raise US$1.5 billion when the share sale closes next Monday, higher than the original US$1.2171 billion high-end target at US$13 apiece. The US$15 IPO price put the market valuation of Xpeng at US$10.8 billion.

Xpeng’s IPO eclipsed those launched by its Chinese electric car rivals Li Auto (US$1.1 billion in July 2020) and Nio (US$1 billion in September 2018). It also overtook Tesla’s US$226 million in June 2010, indicating investors’ constantly increasing enthusiasm in the electric car companies despite the coronavirus pandemic and escalating U.S.-China tensions, which might threaten to delist all Chinese companies on Wall Street.

Xpeng closed some mortar-and-brick stores in February and March this year when China was hit badly by the coronavirus outbreak. Net loss for the first half of 2020 shrank to US$113 million from US$1,918 million during the same period of 2019 but it was mainly because of significantly reduced operating expenses.

Underwriters for the deal are Credit Suisse, J.P. Morgan and BofA Securities.

Big Investors

The stronger-than-expected buying momentum has prompted Xpeng to upsize its IPO volume by 15 million American depository shares. Big names like Alibaba, which plans to buy US$200 million worth of ADSs, Coatue (US$100 million) and Qatar Investment and Xiaomi (US$50 million each) appear in the updated prospectus. PRIMECAP Management Company, a shareholder of Tesla, also plans to purchase US$100 million worth of ADSs.

Prior to its IPO, Xpeng had completed 10 rounds of financing, attracting magnates like Jack Ma, the founder of Alibaba and Lei Jun, the founder of Xiaomi. It had raised 12 billion yuan (US$1.7 billion) in total.

He Xiaopeng, the Chairman and CEO of Xpeng Motors, will see his personal wealth bloating to US$29 billion upon the completion of the IPO. He, who had been a programmer and product manager, founded Xpeng in August 2014.

Prior to the IPO, He held a 31.6% stake. Alibaba was the second largest shareholder with 14.4%, IDG 6.2% and Morningside entities 4.2%, GGV entities 3.8%；Shanghai Cheyou 3.5% and Primavera entities 3.2%.

The founder’s post-IPO stake will fall to 27.8% but he has 58.9% voting right.

Lei Jun, an entrepreneur and billionaire, said in his Wechat post that he had invested in UC founded by He in 2007. “He has been my friend for many years. A few years ago, He decided to embark on another venture. I admire his courage. Xiaomi invested US$50 million Xpeng last year,” he added. UC was sold to Alibaba for nearly US$4 billion in June 2014.

In the Red

Despite investors’ appetite in Xpeng shares, the company has been losing money in the past few years.

According to the prospectus, net loss in 2019 was US$523 million, up from RMB1,399 million (US$120 million) in 2018. In the first 6 months of 2019, net loss shrank mainly because of a plunge in operational costs.

From January 2015 to July 2020, the automaker delivered 20,707 vehicles in total. Xpeng currently has two car models on the market: the G3 SUV and the P7 sedan. The latter competes with Tesla’s Model 3.

Proceeds from the IPO will be used mainly for research and development and expanding sale channels, according to the prospectus.