The ChiNext-listed company has held discussions internally and externally with financial advisers for the potential listing, which could come as early as next year, said two of the people.
China Securities, CICC, Goldman Sachs and UBS, which arranged CATL’s Rmb45bn (US$6.55bn) A-share private placement last year and were also picked for the scrapped GDR issue, are expected to lead the Hong Kong listing if the deal goes ahead, said the people.
They said it is too early to talk about the fundraising size but the target size for the GDR can be seen as a reference.
A-shares in CATL, the world’s largest lithium-ion battery manufacturer, are down 18.5% this year for a market capitalisation of Rmb791bn.
CATL did not respond to emails seeking comment.
A Hong Kong listing would allow CATL to tap international money at a time when Chinese regulators are strictly controlling the pace and size of domestic IPOs and follow-ons as part of a package to boost the country's flagging stock market.
Even before that, regulatory approvals for GDRs were put on pause in March because regulators had concerns that the sheer size of some planned issues would pressure the A-share markets, ECM bankers told IFR at the time.
GDRs from Chinese companies, generally listed on the SIX Swiss Exchange and London Stock Exchange, have mostly been sold to Chinese investors, who convert them to A-shares after the 120-day lock-up expires. Investors then receive cash after brokers help them sell the underlying A-shares in China.
There have been few Sino-European GDRs since the China Securities Regulatory Commission in May announced a stricter regime for GDR listings. The filing process has been aligned with A-share follow-ons and there are also new specifications about the size and pace of deals, as well as the use of proceeds.
The only option
“I think for CATL and other sizable A-share companies, the fundraising options are very limited these days,” said one of the people. “If you are looking to raise a lot, you can’t do A-shares or GDRs. The only option left is a Hong Kong listing.”
Logistics company SF Holding and home appliance giant Midea Group, which are both listed on the Shenzhen Stock Exchange, have filed for Hong Kong listings, with the former targeting US$2bn–$3bn and the latter about US$3bn.
However, it is understood that CATL has concerns over the size of the discount to its A-shares that it would need to offer for the potential Hong Kong listing and whether the city's tepid IPO market can accommodate a float that could raise several billion US dollars.
Shanghai-listed duty-free shop operator China Tourism Group Duty Free in August 2022 raised HK$16.2bn (US$2.1bn) from a Hong Kong listing at a price representing a 27.5% discount to its A-shares.
According to an EY report on Tuesday, as of November 17, Hong Kong IPOs raised a combined HK$41.3bn this year, down 59% year on year and the lowest amount since 2003. Chinese distiller ZJLD Group’s HK$5.31bn IPO is the city’s largest so far in 2023.
Facing slowing demand in China and intense competition from cheaper products, CATL in August released the world’s first superfast charging lithium iron phosphate battery. It also announced on Tuesday it is partnering with Stellantis to set up a factory for low-cost EV batteries in Europe.
CATL posted a third-quarter profit of Rmb10.4bn, up 10.7% from a year earlier.
（Picture: Veer）
