More than 10, why do Chinese lithium battery companies love to go public in Switzerland

Economic Observation Network reporter Zhou Ju Another Chinese lithium battery company listed in Switzerland was approved. On February 28, Tianneng Power announced that the company's issuance of GDRs (Global Depositary Receipts) and listing on the SIX Swiss Exchange has received conditional approval from the Swiss Exchange Supervisory Authority. According to the past practice, if there are no surprises, Tianneng Power may be able to achieve a Swiss launch within a few months.

Entering 2023, the news of the listing of Chinese lithium battery company Swiss GDR continues. In addition to Tianneng Power, on February 17, Hangke Technology issued an announcement on the GDR issuance price, issuance results and other matters, raising a total of about 173 million US dollars. On February 6, Shengxin Lithium Energy announced that the company's issuance of GDR and listing on the SIX Swiss Exchange received conditional approval from the Swiss Exchange Supervisory Authority. In January, Tianci Materials announced that the issuance and listing of GDRs on the SIX Swiss Exchange received conditional approval from the Supervisory Authority of the Swiss Exchange.

It is also reported that CATL is also considering issuing GDR in Switzerland, planning to raise about 5 billion to 6 billion US dollars. In response to this news, CATL said in an interview with the Economic Observation Network reporter that it "does not comment".

In fact, since the second half of last year, Chinese lithium battery companies have set off a wave of Swiss listings. In July last year, four domestic lithium battery companies, Guoxuan Hi-Tech, Grammy, Shanshan and Keda Manufacturing, officially issued GDRs on the Swiss Stock Exchange, which was the first batch of Chinese companies to land on the Swiss Stock Exchange, with a total fundraising scale of more than 1.5 billion US dollars. In November of the same year, Sunwoda was officially listed on the SIX Swiss Exchange.

Like Tianneng Power and Shengxin Lithium Energy, there are also Huayou Cobalt, Xingyuan Material, and Tianci Material in the process of listing trial. In December 2022, Huayou Cobalt announced that its issuance of GDRs and listing on the SIX Swiss Exchange was subject to conditional approval by the SIX Swiss Exchange; In the same month, Xingyuan Material indicated that the issuance of GDR and listing on the Swiss Stock Exchange was approved by the China Securities Regulatory Commission.

According to this calculation, up to now, more than 10 Chinese lithium battery industry chain enterprises have been listed in the Swiss GDR or are applying for listing. For a time, Switzerland became the first choice for domestic lithium battery industry chain enterprises to go public. And why do Chinese lithium battery companies organize groups to go public in Switzerland?

According to the data, the so-called Global Depositary Receipts (GDRs) refer to securities issued by depositaries, based on shares listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange, issued and listed on specified overseas exchanges. The convenience of this listing route is that Chinese car companies do not need to issue new shares overseas, but put part of the domestic stocks overseas for financing and trading, that is, overseas personnel can also buy and sell the shares of A-share listed enterprises without incurring additional Swiss turnover tax and transaction tax costs.

Switzerland has become a new listing destination for China's lithium battery industry chain enterprises, mainly for several reasons.

"At present, other markets (listing) are relatively difficult, let alone the United States, which is very difficult, at least there is a chance to go to Switzerland." Cao He, president of Quanlian Auto Investment Management (Beijing) Co., Ltd., said in an interview with the Economic Observer Network that at present, the Swiss listing of Chinese enterprises has policy support and is a more suitable new financing channel.

In February 2022, the China Securities Regulatory Commission (CSRC) issued the Regulatory Provisions on the Depository Receipt Business of Domestic and Overseas Stock Exchanges, expanding the exchange where domestic GDR issuers are located from the Shanghai Stock Exchange to the Shenzhen Stock Exchange, and expanding the listing venue of overseas GDRs from the UK to Switzerland and Germany. It is reported that in Europe, compared with the United Kingdom and Germany, the process of the Swiss Exchange is relatively simple and the time cost is lower.

Previously, relevant people of Guoxuan Hi-Tech said frankly in an interview with the media that the issuance and approval process of Swiss GDR is relatively simple, usually completed in three or four months, which makes the total cost of issuance lower than other overseas IPOs. In addition, Sunwoda took Sunwoda as an example, from the first disclosure of its Swiss listing plan in April 2022 to its official listing in November, in only 7 months.

At the same time, the Swiss Exchange has strong financing capabilities, which is one of the reasons why it attracts Chinese lithium battery companies. It is reported that Switzerland is one of the major financial centers in Europe, the banking and insurance industry is developed, and Swiss securities exchange, as one of the old exchanges in Europe, has high liquidity and financing capacity. Switzerland is also a leading global wealth management centre, with more than US$8 trillion in assets, and companies listed on the Swiss Exchange have access to well-funded and experienced investors to broaden their ability to raise capital overseas.

Third, based on Switzerland's political neutrality, it is more prudent to choose a Swiss listing, especially in the current situation of unstable Sino-US relations and difficulties in listing in the United States. Zhang Lei, a member of the executive committee of Huatai United Securities, said in an interview with the media that Switzerland is a permanently neutral economy, and in general, the macroeconomic and financial environment is stable, and the Swiss franc exchange rate is also relatively stable, which is conducive to the valuation of issuers, including the continued stability of market value.

From the specific lithium battery business, listing in Switzerland will be conducive to the lithium battery industry chain, especially power battery companies to expand overseas markets. According to the prediction of Toubao market research, the demand for European power batteries will reach 174GWh in 2025 and 820GWh by 2030, with great potential. However, in Europe, the power battery market is mainly dominated by Korean companies LG and SK, and Chinese companies have the motivation to expand the European market. In the past two years, power battery companies such as Guoxuan Hi-Tech and CATL have begun to deploy in Europe.

In 2021, Guoxuan Hi-Tech announced plans to invest and build factories in Europe and the United States, and established its first new energy production and operation base in Europe. Guoxuan Hi-Tech announced that the company has reached strategic cooperation with a number of international customers and signed product sales orders, gradually building a global market system, and the issuance and listing of GDR will help expand the global market share of the company's products. Guoxuan Hi-Tech said that it will make full use of the favorable opportunity of the interconnection of the Chinese and European capital markets to enhance the company's brand influence on a global scale, broaden its overseas financial financing capabilities, and ensure the financial needs of the company's international strategic development.

CATL's plant in Thuringia, Germany, has been under construction since 2019 and is currently in the trial production stage. In August 2022, CATL said that it intends to invest in the Hungarian Times New Energy Battery Industry Base project in Debrecen, Hungary, with a total investment of no more than 7.34 billion euros, which will be the largest battery factory in Europe to date.

In many positive circumstances, Switzerland is expected to continue to become a popular destination for overseas listing of China's automobile industry chain for a period of time, Swiss Ambassador to China Jürg Burri recently revealed to the media that at present, there are about 9 Chinese companies officially listed on the Swiss Exchange through global depositary receipts, while "more than 30 Chinese companies are queuing up to apply for listing".

At present, in the automotive industry, most companies in the lithium battery industry chain have gone public in Switzerland, and there are still few vehicle companies. "The whole vehicle can go up, and the second echelon of new car companies may go in that direction." Cao He said that for Nezha and WM Motor, which were previously stranded on the IPO, this may also be a new choice.

For enterprises, there are also some potential risks in listing in Switzerland, such as the earnings per share may be diluted after the expansion of share capital, and if the GDR is converted into A shares, it will increase the outstanding shares of A shares, resulting in pressure on the stock price of A shares. However, the appeal of Swiss GDR listings is much higher than the risk considerations, and the wave of Swiss listings will continue for some time.