Breakthrough and Metaphor of Contemporary Amperex Technology's Listing in Hong Kong

Starting from 2023, there have been widespread rumors in the market about Contemporary Amperex Technology (300750.SZ) listing in Hong Kong, and now the rumors have finally come true. On December 27, Contemporary Amperex Technology officially announced its listing in Hong Kong. Although the fundraising amount has not been disclosed, according to media reports, the amount raised may be around $5 billion, with the corresponding H-share issuance ratio at about 3%. According to the rules of the Hong Kong Stock Exchange, the public shareholding ratio of a listed company's stock cannot be lower than 25%, but exemptions can be granted in special circumstances. However, based on past practices, the H-share issuance ratio of A-share companies is usually not less than 5%. However, this year, S.F. Holding (06936) became the first A-share company to have an H-share issuance ratio lower than 5% when it listed on the Hong Kong Stock Exchange. This may be the underlying logic behind the rumored fundraising amount for Contemporary Amperex Technology, and it is expected to relieve some of the fundraising pressure for its H-share issuance. Contemporary Amperex Technology still has substantial cash reserves, with cash and cash equivalents amounting to 234.954 billion yuan at the end of the third quarter of this year. However, at the same time, there are challenges in terms of the foreign exchange reserves needed for international expansion. As of the end of June this year, the balances in US dollars and euros were 6.735 billion yuan and 3.858 billion yuan respectively. Regarding the necessity of listing in Hong Kong, Contemporary Amperex Technology stated that it is to "advance its global strategy and build an international capital operation platform." "Less than 5%" - the second case? Contemporary Amperex Technology's listing in Hong Kong this time did not exceed market expectations. Earlier, media reports had stated that Contemporary Amperex Technology planned to list in Hong Kong, but at the time, it did not deny this. Currently, Contemporary Amperex Technology has not disclosed the fundraising amount. According to previous reports, Contemporary Amperex Technology planned to raise $5 billion, which is equivalent to about 36.5 billion yuan, and the corresponding H-share issuance ratio is estimated to be 3.2%, but this information has not been confirmed by Contemporary Amperex Technology. In fact, the back-calculated issuance ratio is related to the changes in actual cases of H-share issuances on the Hong Kong Stock Exchange. According to the listing rules of the Hong Kong Stock Exchange, the total number of issued shares (excluding treasury shares) must be at least 25% held by the public, but exemptions can be applied for in special circumstances. According to TradeWind01, citing sources close to investment banks working with the Hong Kong Stock Exchange, the A-share company Midea Group Co., Ltd (00300), which listed on the Hong Kong Stock Exchange this year, applied for an exemption, resulting in an H-share issuance ratio of 7.49%. For a long time, the issuance ratio was generally not less than 5%, but this year, S.F. Holding's issuance broke this potential constraint, with an H-share issuance ratio as low as 3.41%, becoming the first A-share company to have an issuance ratio exceeding 5%. "In the practical process, A-share companies generally communicate and agree on an H-share issuance ratio above 5%, but with SF Express breaking this limit, and now encouraging A-share companies to list in Hong Kong, the issuance ratio for large-cap companies may be further relaxed in the future," said an investment bank executive in Beijing. This may further reduce the fundraising pressure for Contemporary Amperex Technology. According to TradeWind01, based on a 5% H-share issuance ratio, the fundraising amount for Contemporary Amperex Technology could reach 57.6 billion yuan, potentially making it the fourth largest fundraising scale in the history of the Hong Kong Stock Exchange in the past decade. However, some market participants believe that in order to reduce the dilution impact on equity, Contemporary Amperex Technology's issuance ratio could be lower than 5%. If calculated based on a 3%-4% H-share issuance ratio, the fundraising amount for Contemporary Amperex Technology would be between 34.5 billion yuan and 46 billion yuan. This means that if Contemporary Amperex Technology can issue shares at this ratio, it may become the second A-share company after SF Express to have an H-share issuance ratio of less than 5%. These are all speculations, and the final fundraising amount for Contemporary Amperex Technology may not necessarily be limited to $5 billion. An example of unexpected exceedance was the previous listing of Midea Group Co., Ltd in Hong Kong. Before listing in Hong Kong, the South China Morning Post had stated that its fundraising amount was $1 billion, but the final fundraising amount reached $4.5 billion. Aiming for global "ammunition" Contemporary Amperex Technology is "not short of money." As of the end of the third quarter of this year, Contemporary Amperex Technology had cash and cash equivalents of 234.954 billion yuan. As early as 2022, Contemporary Amperex Technology had raised 45 billion yuan for projects such as lithium-ion battery production bases. As of the end of June this year, Contemporary Amperex Technology...The amount of funds raised that has not been used yet still reaches 9.312 billion yuan, of which 6.437 billion yuan has been used for cash management.In fact, perhaps the foreign exchange is the most urgent gap to be filled. As of the end of June this year, Contemporary Amperex Technology had foreign currency balances of $6.735 billion and 3.858 billion. Such foreign currency reserves may pose certain pressures for Contemporary Amperex Technology, which is building factories overseas. In December of this year, Contemporary Amperex Technology announced plans to jointly establish a joint venture company in Spain with Stellantis, the fourth largest global car manufacturer. Both parties will hold a 50% stake in the joint venture company to build a joint battery factory in Zaragoza, Aragon Autonomous Community, Spain, with an expected total investment of up to 4.038 billion. According to the 50% ownership ratio, Contemporary Amperex Technology needs to invest at least 2.919 billion. Meanwhile, the first phase of Contemporary Amperex Technology's factory in Hungary is still under construction. With more overseas expansion, the demand for foreign exchange by Contemporary Amperex Technology is also gradually increasing, but its overseas income proportion is relatively limited. In the first half of 2024, Contemporary Amperex Technology's overseas income was 50.529 billion, accounting for around 30% of total income. As the domestic market competition intensifies, going global is indeed an important way for Contemporary Amperex Technology to open up performance space, but the growth of the new energy vehicle market in Europe is not significant. According to Dataforce data, the sales of pure electric vehicles in Europe decreased by 0.4% year-on-year in November, with a 1.4% decrease in sales from January to November this year. In November, the European Automobile Manufacturers Association lowered the market share of pure electric vehicles in 2025 from the beginning of the year's 27% to 21%. As a partner of Contemporary Amperex Technology, Stellantis is also having a tough time, with revenue and net profit in the first half of 2024 decreasing by 13.57% and 48.51%, respectively. This may bring greater pressure to the internationalization of Contemporary Amperex Technology. Policy support is frequent In addition to Contemporary Amperex Technology, A-share companies such as "pharmaceutical leader" Jiangsu Hengrui Pharmaceuticals (600276.SH), semiconductor company Shenzhen Longsys Electronics (301308.SZ), and Fortior Technology (Shenzhen) Co., (688279.SH) are planning to go public in Hong Kong to further open up overseas markets. This is also inseparable from the strong support of the regulatory authorities. On the one hand, to promote A-share companies' financing through listing in Hong Kong, the Hong Kong Stock Exchange recently planned to further lower the listing threshold. The Hong Kong Stock Exchange suggested lowering the minimum threshold for A+H-share issuers to list in Hong Kong to at least 10% of the total issued shares of the same category of A+H-share issuers (excluding treasury shares), or the expected market value of the relevant H-shares at the time of listing is at least HK$3 billion and held by the public. Compared to the 25% H-share issuance ratio, this has already been significantly reduced. "A high H-share issuance ratio will bring more pressure to companies with higher market capitalization because they may not be able to raise such a large amount," a banker in Shanghai pointed out. For example, without considering exemptions and other conditions, if an A-share company has a market value of 5 billion, according to the past 25% issuance proportion, it needs to raise 1.25 billion; but if the company's market value is 50 billion, the fundraising size needs to reach 12.5 billion. If the Hong Kong Stock Exchanges suggestions are implemented, the Hong Kong fundraising pressure for A-share companies will also be further reduced. On the other hand, the China Securities Regulatory Commission has been continuously supporting domestic companies to list in Hong Kong. In April of this year, the China Securities Regulatory Commission issued a document stating that it will further increase communication and coordination with relevant departments to support qualified leading domestic enterprises to raise funds through listing in Hong Kong. "Previously, some A-share companies with relatively high market capitalization wanted to list in Hong Kong, and they needed to communicate with domestic regulatory agencies for a long time because relevant departments were concerned about the impact on domestic market prices," a banker in East China pointed out, "But the current policy still supports A-share companies to list in Hong Kong, and the Hong Kong Stock Exchange and Hong Kong regulatory agencies are very cooperative." However, the banker also admitted that Hong Kong fundraising is more market-oriented and pricing of the company's issuance is also a test. "Although the threshold will be further lowered, the main problem with Hong Kong fundraising is that it is more difficult to issue, and cornerstone investments and follow-up trades require money. Leading companies may be better off, but companies with average market recognition may still face difficulties in fundraising," the aforementioned banker further pointed out. This article is compiled from "Wall Street See". Editor: Zhang Jinliang.