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August 4, 2021updated 06 Aug 2021 3:07pm

Homecoming: Li Auto aims for $1.93bn Hong Kong float amid China IPO crackdown

By Elles Houweling

Chinese electric vehicle (EV) manufacturer Li Auto aims to raise as much as HKD 15bn ($1.93bn) in an initial public offering (IPO) in Hong Kong. The company’s announcement comes only a few weeks after rival XPeng raised $1.8bn in its Hong Kong debut, potentially highlighting a trend of Chinese companies coming home and choosing to list in the southern financial hub.

The Beijing-based venture said on Tuesday that it would issue 100 million shares in its Hong Kong IPO at a maximum offer price of HKD150 per share. Li Auto’s choice to opt for a secondary listing in Hong Kong follows its debut on the Nasdaq in July 2020, which saw the company raise $1.09bn.

The move comes amid a time of heightened scrutiny for Chinese companies wishing to trade on US exchanges.

This week, the US Securities and Exchange Commission (SEC) said that Chinese companies seeking to go public in the United States had to first fully explain their legal structures and disclose any risk of governmental interference in their business.

Meanwhile, Chinese regulators are also closing in on companies deciding to debut abroad, notably in the US. Following Didi’s spectacular removal from Chinese app stores merely days after its New York IPO in June, China’s State Council has said it would continue its crackdown, which spans everything from property debt and fintech to antitrust issues and cybersecurity.

However, the threat over national security is very likely only a guise from Chinese regulators, Michael Orme, senior analyst and China specialist at GlobalData, argued earlier this week.

“What Beijing is really up to is boosting Hong Kong in the mid-term over the US for listing, and you can be sure that even though it’s just softened its policy on US IPOs, the Chinese regulators will make it much easier and far less tedious for Chinese companies to list in Hong Kong that the US,” he said.

At the same time, Li Auto’s second listing also underscores China’s booming EV market. The appetite for new energy vehicles (NEVs) is large among Chinese consumers, prompting many companies to enter the industry. Traditional car manufacturers, as well as other big names in tech, such as Huawei, Xiaomi and Baidu, have all set their eyes on the future of transport in China.

“China has aimed to make NEVs account for 25% of its auto sales by 2025,” write GlobalData analysts in the thematic report. “The country accounts for nearly 38% of global EV sales, as of 2020, reflecting China’s position as the most populous country and the one with highest demand for transportation.”

Earlier in the week, Li Auto reported a more than three-fold jump in the delivery of its only mid-size crossover SUV, Li ONEs, crossing the 8,000-vehicle milestone in July, Reuters reports.

Li Auto is scheduled to start trading on Hong Kong’s main board on August 12, under the stock code 2015. The Hong Kong public offering began on Tuesday and will end on Friday, when the final offer price will also be determined, taking its lead from the American depositary shares price.

The listing will also include a greenshoe, or over-allotment option, to sell a further 15 million shares within 30 days after listing, likely taking the total amount raised to up to HKD17.25bn.