What happened behind the forced listing of ZEEKR at a discount?

Car memorabilia

2024-05-13 18:28Posted in Hubei Automobile Creators

On May 10, U.S. time, ZEEKR officially landed on the New York Stock Exchange, which is the tenth listed company in the hands of Li Shufu, chairman of Geely Holding Group, and the fastest IPO in history.

What happened behind the forced listing of ZEEKR at a discount?

Looking back on the entire development history of ZEEKR automobiles, it can be found that ZEEKR has been moving forward since its birth: less than one month after its establishment, the first model 001 was opened for pre-sale; In the 29 months since its establishment, 4 models have been put on sale; 37 months after its establishment, the company officially went public in the United States, and the speed and pace of action made all other new forces unreachable.

It is worth noting that this is not the first time that ZEEKR has attempted an IPO, as early as the end of 2022, it has applied for an IPO in the United States, planning to raise more than $1 billion, but it was shelved due to a lower than expected valuation, and it will not restart the IPO until April 2024. However, the size of the IPO has dropped to $500 million, which is only half of what it was a few months ago, but even so, ZEEKR has to be forcibly listed, what is the secret behind this?

融资额折价一半仍执意IPO

Despite the halo of "the fastest IPO new force in history", the road to listing of ZEEKR can be described as twists and turns.

As early as October 2022, Geely Automobile announced that it had submitted a proposal to the Hong Kong Stock Exchange on spinning off ZEEKR and listing it independently, which was confirmed by the Hong Kong Stock Exchange, but details such as the listing location, offering scale, and price range have not yet been determined. Two months later, in December of the same year, ZEEKR changed its listing location from Hong Kong to the United States, and it is said that ZEEKR has submitted a draft registration statement to the US Securities and Exchange Commission for a possible IPO. Geely did not explain why it changed the listing location of ZEEKR, but according to industry speculation, the move may be to seek a higher valuation.

In August 2023, ZEEKR received the filing notice of the China Securities Regulatory Commission for overseas issuance and listing, and subsequently completed the filing application of the China Securities Regulatory Commission. In November of the same year, ZEEKR submitted an IPO prospectus document to the Securities and Exchange Commission (SEC), planning to be listed on the New York Stock Exchange, and it was reported that it hoped to raise more than $1 billion at a valuation of $18 billion, but only a month later, the plan to go public in the United States was put on hold, and the reason for this was that some media reported that the valuation was not up to expectations because of the weak market.

The next IPO will be in April this year, and ZEEKR's IPO plan to the United States will be officially restarted, and it is expected to raise about 500 million US dollars, which is half of the amount compared with a few months ago. What is surprising is that even at a discount of half, ZEEKR still insisted on going public, and it succeeded: on May 10, US time, after bidding, ZEEKR officially started trading at a price of $25.51, and the closing price of the day was $28.26, an increase of 34.57%, with a market value of $6.898 billion.

It is worth mentioning that before the IPO in the United States, ZEEKR had experienced two rounds of external private equity financing. The first time was in August 2021, when five companies, including Intel Capital, CATL, Bilibili Bilibili, Hongshang Group and Boyu Capital, invested $100 million each to participate in the Pre-A round of financing of ZEEKR, holding a total of about 5.6% of the shares after the investment. The second (Series A financing) was in February 2023, when Geely Automobile issued and allotted about 139 million Series A preferred shares to five investors, including Amnon Shashua, founder of Mobileye Global Inc., and CATL, totaling $750 million, and after the completion of the financing, the valuation of Zeekr was about $13 billion.

After the successful IPO, the market value of ZEEKR (about $6.9 billion) is obviously far from its valuation after the completion of the Series A financing ($13 billion), and it is lower than the new car-making force "Wei Xiaoli" (market capitalization of $10.581 billion, $7.292 billion and $26.499 billion), which also landed on the New York Stock Exchange.

The capital chain is urgent: 20.9 billion yuan will be burned in 3 years

ZEEKR's practice of IPO as soon as possible at the expense of self-depreciation is obviously easy to make many people puzzled: what reason is there to force ZEEKR to be listed as soon as possible? If so, financial pressure must be the primary factor.

An Conghui, CEO of ZEEKR, once said that Geely has tens of billions of profits a year, and ZEEKR is not short of money, and the reason why it promotes financing is to form a closer relationship with some strategic investors. This sentence may have some convincing force in two rounds of financing, but it is not necessarily today.

From 2021 to 2023, the net losses of ZEEKR will be 4.51 billion yuan, 7.66 billion yuan and 8.26 billion yuan respectively, and the loss amount will expand year by year, with a cumulative loss of 20.9 billion yuan in three years, while the cumulative income of the two rounds of financing will be 1.25 billion US dollars, equivalent to about 9 billion yuan, which is less than half of the loss amount.

Looking at the company's cash flow, as of the end of 2023, ZEEKR's cash reserves are only 4.145 billion yuan, according to the rate of burning money in 2023, it is only enough to spend half a year, and it is difficult to believe that there is no shortage of money. For reference, the cash reserves of NIO, XPeng and Li in the same period were 57.3 billion yuan, 45.7 billion yuan and 103.6 billion yuan respectively.

The research and development of both the three-electric system and the intelligent cockpit requires a lot of investment, especially the intelligent cockpit and automatic driving, the research and development amount is often tens of billions, and it is a bottomless pit. At the same time, the return cycle of car manufacturing is quite long, and only Tesla and Ideal are currently profitable among the new forces, and the others are in a state of loss.

Although the total revenue has basically increased significantly every year (except for 2019 and 2020), it is difficult to see a significant improvement in net profit after a sharp turn in 2019, hovering around 5 billion yuan in the past 4 years, coupled with the rapid expansion of the business territory (successively acquiring Volvo, Proton, Lotus and Daimler shares), the capital chain has begun to tighten, which is also the reason why Geely has made Polestar, ECARX, An important reason why Lotus has gone public in the form of IPO or SPAC.

Whether it is from the operating conditions of the parent company Geely Holdings, or referring to ZEEKR's own losses and cash reserves, ZEEKR's financial pressure is obvious, and in the financial environment where investors have gradually lost patience with new car-making forces in recent years, IPO may be the most effective means for ZEEKR to quickly alleviate financial pressure.

Going public in the United States is to "roll out"?

In addition to financial pressure, the fierce competition environment of domestic new energy vehicles and the market volume have also contributed to the IPO of ZEEKR in the United States.

The current model matrix of ZEEKR Motors on sale includes 001, 001FR, 007, 009, 009 Radiance four-seater version and X, of which 001 and 007 are responsible for sales. In 2023, ZEEKR will sell 118,600 units, with 001 accounting for 64%. Entering 2024, with the 007 ushering in mass delivery, the 001 and 007 models contribute more than 90% of the sales of Zeekr. However, now, the competitive environment in the 200,000-300,000 yuan market that these two cars focus on is deteriorating sharply.

At the end of March, Xiaomi's first model SU7 entered the market at a price of 215,900-299,900 yuan, which was tough with the ZEEKR 007 priced at 209,900-299,900 yuan, and also had a great intersection with the ZEEKR 001 priced at 269,000-329,000 yuan. Xiaomi's own mature intelligent ecological chain and high-sticky user group have made its first model market quite hot, which is undoubtedly bad news for other car manufacturers, and even more so for ZEEKR cars, which rely on 001 and 007 to harvest more than 90% of sales.

In fact, it is no accident that Xiaomi has entered the market in the range of 200,000-300,000 yuan, because this range is one of the fastest growing market segments in China, and it is also the most competitive market segment. In addition to Xiaomi SU7, GAC Aion's high-end electric vehicle brand Haobo's two volume models GT and HT are also targeting the 200,000-300,000 yuan market (priced at 219,900-339,900 yuan and 213,900-329,900 yuan respectively), plus the original BYD Han, Xpeng P7, Tesla Model 3 and Model Y and other strong competitors, the battle can be described as quite fierce.

In addition, the range of 200,000-300,000 yuan is the most active area of the joint venture brand, and the electrification products of the joint venture brand are mainly deployed in this market segment, such as Toyota Asia Dragon, Honda CR-V, Volkswagen ID.4 X, Nissan X-Trail, etc., which makes the competition situation in this market segment more complex than other markets.

In this case, how can ZEEKR, which is in an increasingly difficult situation, break this deadlock? An Conghui has already given the answer: "roll up, roll outward". "Rolling up" cannot be achieved overnight, and "rolling outward" with more time advantages has naturally become a top priority.

The good news is that Europe and the United States, which can digest 200,000-300,000 yuan of mid-to-high-end tram products, have ushered in a period of rapid growth in the new energy vehicle market in recent years. In 2023, the sales of pure electric vehicles in the United States will reach 1.187 million units, a year-on-year increase of 48%. In Europe, the market share of electric vehicles (15.7%) in 2023 will surpass diesel vehicles (11.9%) for the first time, becoming the third largest source of power after gasoline and hybrid vehicles. Although since December last year, the demand for electric vehicles in Europe has cooled down due to the decline in subsidies from various governments, and sales have fallen sharply, the current penetration rate of new energy vehicles in Europe is only about 20%, and there is still a lot of room for growth in the long run. At the same time, the electrification process of traditional brands in Europe and the United States is generally slower than that of Chinese brands, and the competitiveness of new energy products is not strong.

It is worth mentioning that Geely Holdings, the parent company of Zeekr, has a deep relationship with Europe, and its acquisition of Volvo and Polestar are both Swedish car brands, which are listed in Stockholm, Sweden and NASDAQ in the United States, respectively, and also acquired 9.69% of the shares of Daimler Group, the parent company of Mercedes-Benz, which has a certain foundation in the European and American markets. At the same time, Geely Automobile's achievements in overseas markets are also remarkable, with cumulative overseas export sales reaching 274,000 units in 2023, a year-on-year increase of more than 38%, and service outlets in 70 countries around the world, all of which provide convenience for ZEEKR's "outward rolling".

Under the premise that the foundation of "going out" has been laid, ZEEKR's "outward roll" is no longer an empty word, and choosing to be listed on the New York Stock Exchange in the United States can undoubtedly further enhance its popularity and competitiveness in Western countries, which may be the truth of ZEEKR's urgent IPO in the United States.

So, can ZEEKR's "roll outward" be smooth sailing? It's too early to talk about this, after all, "going abroad to find new growth points" is the common dream and action plan of all mainstream Chinese car companies, coupled with the sharp decline in European electric vehicle sales in recent months, the growth rate of electric vehicle sales in the United States has also slowed down significantly, and ZEEKR may not be able to get what it wants, but not going out is equivalent to sitting still, everything is a helpless choice in a difficult situation.

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