Tesla’s Chinese rival Xpeng raising $2 billion in dual listing


Ongoing competition among electric vehicles is continuing to ramp up, and while Tesla remains the current king of the hill, newcomers are continuing to gain traction among investors chasing the next hot EV stock. This is especially true when it comes to the Chinese EV market, which some consider to be perhaps the most important market on the planet. Tesla’s largest Chinese competitor, Xpeng (NASDAQ: XPEV), is looking to ramp up production in Asia by raising some extra financing from a Hong Kong listing.

The Chinese EV manufacturer said that it would issue 85 million Class A shares at a price of 180 Hong Kong dollars, or around $23.2 per share. A final offer price will be confirmed by around the end of the month. Assuming this price is final, that would mean Xpeng would raise almost $2 billion before underwriting fees.

Although Xpeng is currently listed on the American Nasdaq, a Hong Kong listing would make Xpeng beholden to rules and regulations from both U.S. and Hong Kong regulators. That’s different from a secondary listing, which doesn’t have the same regulator stipulations that a dual primary listing like this one would. It’s pretty uncommon for dual primary listings to happen. Other Chinese-based companies, like Alibaba and JD.com, have both gone through secondary listings, where they have a main location and then sell shares on another exchange.

Rumors were already circulating earlier that a listing would be coming. It wasn’t confirmed whether it would be out of Honk Kong or not – although that was the best guess among Xpeng investors. Tesla already has a strong presence in the Chinese market, but Xpeng is quickly gaining up behind its larger rival.

The Chinese market is already predicted to be the largest EV market in the world, thanks to its billion-plus population or the CCP’s new green-friendly mandates. Even if Tesla remains the top EV company, the Chinese market is large enough for more than one EV manufacturer to succeed. Given that XPeng is less than one-tenth the market cap of Tesla, most analysts are incredibly optimistic about its chances for success. Citigroup Analyst Jeff Chung recently upgraded Xpeng to a buy with a $50 price target, arguing the company has much more to offer than other small EV rivals, like Nio.

Shares of Xpeng were down around 1.5% in response to the news. Generally, raising money by issuing new shares tends to push prices down a bit as existing shareholder equity gets diluted. However, this tends to be overlooked when it comes to high-growth stocks in high-growth markets. The idea is that raising more funds, even if it might not be the best thing for shareholders immediately, will give even better returns in the long-run. Although major indexes are trading near record highs, Xpeng is down 7.2% so far this year.


Xpeng Company Profile

XPeng Inc is a Smart Electric Vehicle company designing, developing, manufacturing and marketing smart electric vehicles in China. The company manufactures environmentally friendly vehicles, namely an SUV (the G3) and a four-door sports sedan (the P7). It targets the mid- to high-end segment in China’s passenger vehicle market. – Warrior Trading News