ICP Li Auto

The trade war between China and the United States hasn't deterred Chinese corporations from pursuing listings on American stock exchanges. Analysts from Ingerson Capital Partners review how Li Auto raised $ 1.1 billion in its Nasdaq launch on Thursday.


The Beijing-based company aims for China's burgeoning middle class, which wants to drive cleaner, smarter, and larger vehicles. Its first model, a six-seat electric SUV that began shipping at the end of last year at a subsidized price of 328,000 yuan (about $ 46,800).


Li Auto's IPO was priced at $ 11.5 per share, well over its goal range, giving it a fully diluted valuation of $ 10 billion. A concurrent private issue of shares to existing investors raised an additional $ 380 million.


Ingerson Capital Partners Head of Capital Markets, Matthew Price said “The IPO was timed to coincide with a boom in investor interest in electric vehicle manufacturers. Tesla's stock has risen dramatically in recent quarters. In recent months, Nio, Li Auto's domestic rival, has seen its stock price rise after raising a similar amount in a $ 1 billion IPO in New York in 2018. ”


Beijing's national initiative to electrify China's auto industry has given investors a boost. The question is whether these businesses have the requisite personnel and resources to succeed in an industry where development cycles are generally longer.


Li Auto is following in the footsteps of its rival Nio, going public after a brief history of customer delivery. According to the company's prospectus, it only started shipping its first model in December of last year and had dispatched a little over 10,000 units as of June.


According to Ingerson Capital Partners research, the startup lost 2.44 billion yuan ($ 350 million) in 2019, up from 1.53 billion yuan in 2018. After starting monetization, it ended the first quarter of 2020 with a gross profit of $ 9.6 million.


Tesla, on the other hand, has been profitable for four quarters in a row. In 2019, it made 284 million yuan ($40.4 million) in annual revenue, mainly from car sales and a minor share from services like charging stalls, a minuscule fraction of Nio's $1.12 billion. On the other hand, Nio had a more considerable net loss of $1.62 billion in the same year.


The investors in Li Auto are undoubtedly optimistic that the Chinese company would one day be able to equal Tesla's commercial success.