China’s CATL’s 5 billion Swiss listing delayed by regulatory concerns

Contemporary New Energy Technology

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A plan by Chinese battery giant CATL to raise at least $5 billion through Swiss global depositary receipts has been delayed, three people with direct knowledge of the matter said, as regulators in Beijing raised concerns about a large-scale offering.

The world’s largest battery manufacturer, formally known as Contemporary New Energy TechnologyCATL is expected to get the green light from China’s securities regulator to list in Zurich by the end of January, one of the sources said. But all three sources told Reuters the process was taking longer than expected.

A week ago, Chinese President Xi Jinping told CATL he had mixed feelings about CATL’s status as the biggest player in a booming business tracking the rise of electric vehicles around the world. Xi’s comments were a rare public intervention in one of China’s most globally competitive industries.

State media quoted Xi as saying he was “both happy and worried” — happy about CATL’s industry leadership, but also worried about the risk of the company expanding rapidly overseas and undercutting domestic rivals.

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According to its 2022 annual report, CATL has a market value of about $139 billion, is expanding in Germany and the United States, and already controls 37% of the global battery market.It supplies automotive giants such as tesla, Volkswagen and BMW.

The company has told the China Securities Regulatory Commission, or China Securities Regulatory Commission, which needs approval for the listing, that it plans to use the proceeds to fund its European expansion plans, in particular to develop a factory in Hungary and possibly also finance it, one of the sources said. Expansion in the United States.

In early February, sources said CATL was targeting a listing as early as May. There is no new timetable for the deal, according to the sources, who said they could not be named while discussing private information.

The China Securities Regulatory Commission had no immediate comment when contacted by Reuters.

CATL did not respond to a request for comment.

private placement

Chinese regulators are concerned about CATL’s massive issuance of GDRs, the sources said.

The China Securities Regulatory Commission is also reviewing CATL’s plan to use proceeds from CATL, the sources said, adding that regulators are not in control after the battery maker raised 45 billion yuan ($6.56 billion) in a massive domestic share placement in June. Institutions have questioned its need to raise so much money.

The company said at the time that the funds raised from the placement would be used to fund lithium-ion battery production and upgrades in four cities in China, and to strengthen research and development.

The private placement was the largest equity capital market deal in China last year and the second-largest follow-on deal globally in 2022, according to Dealogic data.

The $5 billion GDR deal is easily the largest such listing by a Chinese company in Switzerland, according to Refinitiv data.

Chinese companies started listing in Switzerland last year after the launch of a cross-listing platform that allows companies to raise capital by issuing and listing global depositary receipts on SIX Swiss Exchange. Swiss companies can issue Chinese depositary receipts on Chinese exchanges.

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Since launching last year, 11 Chinese companies have raised $3.66 billion in Swiss listings, according to Refinitiv data.

A GDR is a funding option used by companies to provide investors outside the company’s headquarters the opportunity to buy and trade shares on the shareholder’s local exchange.

Overseas investors are attracted to Chinese issuers’ GDRs because they can usually buy shares at a 10% discount and freely switch to corresponding Chinese shares after 120 days of trading on the European board. Investors can exit more easily due to better liquidity in the domestic market.

But when investors move funds from onshore to offshore, it consumes part of China’s foreign exchange reserves, and issuers usually keep the funds raised for overseas use. The practice also made Chinese regulators less willing to go through super-sized GDR issuances, two people familiar with the matter said.

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