Interface News Reporter | Zhou Shuqi
Interface News Editor | Chen Xiaotong
At 12:09 local time on May 10, ZEEKR CEO An Conghui struck the New York Stock Exchange bell three times in a row, and the bell that rang through the scene marked the first time in three years that a new Chinese car-making force was trading in the U.S. stock market. The opening price of ZEEKR is set at $26, which is 23.8% higher than the issue price of $21.
The "ZK" symbol stock representing ZEEKR opened high, and at one point rose 40% from the issue price during the session. As of the close of the U.S. stock market, ZEEKR's stock price closed at $28.26 on the first trading day, with a market value of $6.867 billion, close to the $7.303 billion market value of Xpeng Motors.
An Conghui, who rang the bell at the scene, was always smiling and relaxed, and he was not worried about the stock price trend on the first day of ZEEKR's listing. The head of the start-up electric vehicle company has recently received too many calls from familiar investors and queues for dinner requests, but they can only refuse one by one. Due to the demand for more than 10 times the subscription, ZEEKR stopped accepting IPO subscriptions one day earlier.
An Conghui pointed out in an interview with Jiemian News and other media that ZEEKR does not only consider the valuation and price when entering the IPO, but is based on long-term strategic planning. The listing of the U.S. stock market can enable ZEEKR to achieve more transparent global management and participate in global market competition. Last year, ZEEKR entered the European market and established a direct sales network. The Chinese electric car company has started sales in Sweden, the Netherlands and Germany.
Despite the low valuations of Chinese EV start-ups over the past three years and the questionable prospect of a slowdown in the global EV industry, Zeekr's low valuation and the size of the fundraising it is seeking to raise have attracted the interest of some large US dollar funds.
This is a fairly rare thing. A number of industry insiders interviewed by Jiemian News judged before ZEEKR's listing that compared with the valuation of up to $13 billion during the A round of financing, the target valuation of $5.14 billion set by ZEEKR was significantly discounted. This means that this is not an appropriate listing window, and investors in US dollar funds may remain cautious.
After the official announcement of ZEEKR's official listing on the New York Stock Exchange at 9:30, the longer the company waits for the opening price, to a certain extent, it means that the existing shareholding investors are more optimistic about the stock price trend and are unwilling to sell their existing holdings to promote the transaction.
A person who has participated in a number of U.S. stock listing projects of Chinese companies told Jiemian News that when Xpeng Motors was listed on the New York Stock Exchange in 2020, it waited for about four hours, and then the opening price rose by more than 56% from the issue price.
ZEEKR has set a new record for the fastest listing in the history of new energy vehicles, only 37 months from the brand launch on April 15, 2021 to the successful IPO. The predecessor "Wei Xiaoli" took between 4 and 6 years. Zeekr will raise about $441 million, the largest IPO of a Chinese company in the United States since Didi raised $4.4 billion in mid-2021.
At present, the overall market is relatively at a good time. The KraneShares CSI China Internet ETF (KWEB), which tracks the performance of China's technology stock market, is up 30% from its January lows. According to the MSCI China Index, Chinese concept stocks have risen 10% since the end of March, outperforming some other major indexes. The index reflects the performance of Chinese companies listed in Chinese mainland, Hong Kong and the United States.
Another important reason is that there are not many outstanding shares in the overall market of ZEEKR. According to the red herring version of the prospectus previously submitted by ZEEKR, the company's IPO raised about $368 million, of which the original shareholder Geely Automobile said it would subscribe for no more than $320 million in ADS.
Li Yanwei, an expert member of the Expert Committee of the China Automobile Dealers Association, pointed out in an interview with Jiemian News that there are not many circulating shares in the market, which is easy to speculate, and the sharp rise in market value is conducive to major shareholders pledging shares in exchange for funds, but this high stock price is usually difficult to maintain. Another industry insider familiar with the capital market pointed out to Jiemian News that the stock price can also be issued to increase the capital reserve. There are not many outstanding shares or Geely Holding Group is reluctant to release a large number of shares.
One fact that needs to be acknowledged is that ZEEKR issued depositary shares in its IPO, seeking a significantly lower valuation. This concession increases the attractiveness to investors. Some analysts pointed out that it was a good deal for investors to be able to buy a growth company at a fraction of last year's valuation.
In February 2023, the post-investment valuation of ZEEKR's Series A financing was about $13 billion. According to the issue price of $21 per ADS, the valuation of ZEEKR's IPO is only $5.13 billion, less than 40% of the valuation at the time of Series A financing.
ZEEKR's low valuation also reflects the current state of value of Chinese EV manufacturers in the U.S. market. In the past year, the current stock price of "Wei Xiaoli", which was listed during the period of active capital, is completely different from the peak after listing: Ideal fell by 50%, and Weilai and Xiaopeng fell by nearly 90%. The market's valuation logic for EV companies has changed compared to three years ago.
Jiemian News learned that due to the lower than expected valuation, ZEEKR, which was originally scheduled to be listed at the end of last year, postponed its listing plan. The $5.14 billion valuation set in early May is better than it was during the Chinese New Year period.
Li Donghui, CEO of Geely Holding Group, said that the ZEEKR IPO is a microcosm of Geely Holding's overall strategic plan. Through the IPO, Geely Holding Group will increase the transparency and standardization of corporate governance, enhance the independence and integrity of the operation and accounting of its sub-business groups, improve operational efficiency, and better communicate with users, industries, regulators and investment institutions, so as to promote global compliance governance.
If you want to be regarded as a multinational company and want to attract global talent, the U.S. stock market is the most suitable stop. Gui Lingfeng, director of A.T. Kearney Consulting, told Jiemian News that the listing of Zeekr's U.S. stock market is at a high point of internal performance, which is conducive to valuation, and historical shareholders can achieve returns and cash flow. Externally, ZEEKR has achieved a place in the window period of new energy transformation and a position in the U.S. stock market, and promoted the process of internationalization and brand positioning.
The listing of the U.S. stock market is also conducive to the "return of blood" to ZEEKR. Similar to the situation of NIO and XPeng, ZEEKR has yet to achieve profitability. According to the prospectus, Zeekr's car sales in 2023 will be $4.78 billion, with a total revenue of $7.28 billion, and a loss of $1.16 billion in the same period. Affected by the more fierce market price war at the beginning of this year, ZEEKR's profit in the first quarter may decline.
Ahn did not provide a clear timetable for a turnaround, but he believes it will be smaller than when Tesla turned a profit. In 2020, Tesla's annual sales were 499,500 units when it turned a profit.
"Geely Holding Group's multi-brand strategic advantage can achieve manufacturing synergy and maximize production capacity; In addition, thanks to the platform strategy of Haohan Architecture, brands can form a large-scale effect through joint procurement, and the manufacturing cost will also be advantageous. ”
Unlike traditional automobile companies, where more than 90% of their revenue depends on the sales revenue from selling cars, ZEEKR's revenue is diversified. According to the data, in the first half of this year, the revenue outside of ZEEKR accounted for 38% of the total revenue, including the intellectual property income shared by SEA's vast architecture to other vehicle companies. Brands currently equipped with this architecture include Smart, Geely Galaxy, and Jiyue, which is jointly launched by Geely and Baidu.
However, industry professionals pointed out to Jiemian News that diversified revenue may not necessarily increase the market value of ZEEKR and change investors' views. Compared with "Wei Xiaoli", ZEEKR, which was born out of a traditional car company, is still regarded as a traditional car company rather than a technology-based company, which will affect the value of ZEEKR's U.S. stock to a certain extent.
ZEEKR is also facing a more complex competitive environment. The three models of ZEEKR 001, 009 and X are all niche sub-models, which are significantly affected by the fluctuation of the overall market performance. The first model to enter the mainstream market, Zeekrypton 007, is catching up with Xiaomi cars, and its sales are in a bottleneck period.
According to the data provided by Li Yanwei, the four products of ZEEKR are easily affected by the price reduction of competing products and the launch of new products in the competition of the new energy market. Taking ZEEKR 001 as an example, the launch of the ideal L7 and Wenjie M7 has generated greater pressure on the pure electric model market priced at about 300,000 yuan, and ZEEKR was forced to reduce the price to enter the 200,000 yuan price segment to seek market opportunities.
Another concern for investors is how to achieve the sales target of 650,000 units in 2025 while maintaining its independence. In terms of investment, platform sharing, and the supply of scarce components such as semiconductors and batteries, Zeekr and Geely's other premium EV brands will inevitably have conflicts of interest. Zeekr, Volvo, Polestar, Lotus and Jiyue are all vying for the same customers.
In addition, the cash flow pressure and high asset-liability ratio caused by low cash reserves are also problems that ZEEKR needs to solve to maintain the healthy operation of the enterprise. As of the end of 2023, ZEEKR has a total of 3.26 billion yuan in cash and cash equivalents, while its R&D investment is as high as 8.369 billion yuan in the same period.
According to the official disclosure, the funds raised from the listing of ZEEKR will be mainly used for R&D, products, and channels, adhere to direct sales, and adhere to the self-built energy supplement system. Approximately 45% of this will be used for the development of more advanced BEV technologies and the expansion of the product portfolio, approximately 45% will be used for sales, marketing and expansion of the service and charging network, and approximately 10% will be used for general corporate purposes, including working capital needs, to support business operations.
Another important task of ZEEKR is to become the vanguard of Geely Holding Group's new energy transformation. Most of the management standing on the bell ring balcony of ZEEKR's listing are from Geely Holding Group, and some of them also participated in Geely Automobile's acquisition of Volvo, a classic "snake swallowing elephant" merger and acquisition project in the history of the automobile industry. But perhaps none of these Geely veterans could have predicted that the indirect impact of the deal would extend even 14 years later.
ZEEKR's first prototype was born from the concept car ZERO of Geely and Volvo's joint venture Lynk & Co. When Zeekr announced the launch of its first model in 2021, Geely Automobile's Hong Kong stock price rose sharply, halting the sharp decline in Geely's stock price from its all-time high.
Whether this independently operated start-up can take on the important task of becoming a "new Geely in the new energy era" is only the first step in the marathon.