HONG KONG/BEIJING, July 7 - Chinese EV Maker Xpeng surged 1.8% on its Hong Kong debut on Wednesday after an initial public offering.
The Guangzhou-based company sold 85 million shares which equates to 5% of its stock, according to its prospectus. There is an over-allotment option to sell a further 12.75 million shares that would raise an extra $270 million.
Led by Chief Executive He Xiaopeng, Xpeng will use the funds to develop more advanced smart car technologies, such as autonomous driving functions, with its in-house team of engineers, and will expand its product portfolio. It already has plans for two new car plants in China.
It sells mainly in China, the world's biggest car market, where it competes with Tesla Inc(TSLA.O)and Nio Inc(NIO.N).
The electric carmaker is already listed in the U.S. Usually, Chinese companies listed on Wall Street will do what's known as a secondary listing, usually in Hong Kong. This is where a company, listed on one exchange, goes on to sell shares on another.
Xpeng chose a dual primary listing rather than a secondary listing as it has been listed in New York for less than two years. Under Hong Kong rules, a secondary listing requires at least two financial years of good regulatory compliance on another qualifying exchange.
The dual primary listing allows qualified Chinese investors to take part through the Stock Connect regime linking mainland Chinese and Hong Kong markets, according to the exchange's rules.
After the rally in 2020, electric car-makers have seen their shares decline this year amid increasing competition from legacy automakers, the global semiconductor shortage and general wariness among investors about holding ontoriskier assets.
The Hong Kong share sale will add to Xpeng’s war chest as it competes with an array of upstarts in China, the world’s largest market for electric vehicles. It has already raised billions of dollars through its share sales as well asbank loans.
Xpeng has yet to turn a profit,pledgingto break even by late 2023 or early 2024. Revenue has been increasing, however, reaching 2.95 billion yuan ($456 million) in the first quarter, withdeliveriesin May growing 483% compared to the same month a year earlier.
With the proceeds from the Hong Kong offering, the company aims to expand its product portfolio and develop more advanced technology, develop new models and improve hardware technology, among other targets. The firm is also planning to expand its presence in international markets starting with some European ones.
JPMorgan Chase & Co. and Bank of America Corp. are joint sponsors for the Hong Kong offering.