The launch of Chinese EV Li Auto goes public in the US, raising $ 1.1 billion
The latest electric car to cash in on a new wave of investment in space is Li Auto, a five-year-old Chinese company that went on sale on Nasdaq on Thursday, announcing a $ 1.1 billion preliminary state budget proposal on Thursday. : It is the second start-up of Chinese EV to become a publicly traded company in the United States, following Nio’s 2018 IPO and subsequent listing on the New York Stock Exchange. Apparently, the next one will be XPeng.
Recently, Tesla, becoming the most expensive car manufacturer in the world, suddenly turns its attention to the financing of EV startups. Fresh money has been rushing in recent months from Rivian, Nicola, Fisker, Karma, and even suppliers such as Velodyne and Hyliion, both in the public and private sectors.
While many in the public eye use what is known as a reverse merger (where they combine their business with an already publicly traded company that exists only as a stockbroker, thus avoiding the traditional IPO), Li Auto has taken the standard route. : That applied for publication earlier this year : spent months working with banks և investors. This week, regulators approved the introduction of Li Auto, and the company began trading in shares of the Nasdaq.
Li Auto’s IPO comes at a strange time, as both the Trump administration and a number of Senate lawmakers have passed months laying the groundwork or increase control over Chinese companies on US stock exchanges, or remove (or “remove”) them altogether. In addition to the general escalation of Trump’s trade war with the country, there are concerns about the transparency of Chinese companies that go public in the United States, especially the watchdog that is supposed to keep their tabs, the Public Accounting Oversight Board (PCAOB). , has Chinese banks had to agree on proper audits.
Li Auto takes a different approach to electric vehicles than startups like the Nio. The company’s SUVs are a kind of hybrid. They use electric motors to move (one on the front axle and the other on the rear), but these motors are powered by a 40.5 kWh battery pack. և: The 1.2-liter turbocharged engine is mated to a 45-liter fuel tank (approximately 12 gallons) և 100 kW electric generator that can power the battery pack in real time. The idea is that the car can run on battery power for about 180 kilometers (about 112 miles), but it has a total of 800 kilometers (about 500 miles) when leveraging the combustion engine. (There are different operating modes that can mix power sources).
The company says that this approach helps to address China’s “insufficient private-publicly fast-charging infrastructure” while keeping costs lower than all electric cars. It claims that this approach “will contribute to the wider, earlier adoption of electric vehicles in China.”
Li Auto expects to sell a range of SUVs built on its hybrid technology, ranging from $ 21,000 to $ 70,000. The company started shipping its first model in late 2019 և has so far shipped just over 10,000. This mid-size SUV is well-appointed, equipped with a multi-touch screen, and other technology, such as a leading driver assistance system. The full-size premium version is scheduled for release in 2022.
Like many of its peers, Li Auto sells its SUVs directly to consumers. Unlike Nio, which pays the state-owned automaker a contract to make all of its cars (է plans were drawn up last year to build its own plant), Li Auto builds its own cars. Start-up revenues are modest for the automaker ($ 120 million in the first quarter of 2020), it lost about $ 344 million in 2019, and about $ 214 million in 2018. But it can be more profitable than Nio because of that house. production lost just $ 11 million in its first quarter of 2020, its first full quarter of deliveries.
Sales of the first model of Li Auto have been boosted in recent days by China’s generous subsidies for “new energy vehicles” (including hybrid, electric and even hydrogen-powered vehicles). Accepts registrations in the Securities and Exchange Commission that changes in subsidy policy may affect future sales.
However, a greater policy risk may be the hybrid technology approach. The Chinese government has various regulatory regimes for internal combustion and new energy vehicles. Because Li Auto vehicles are powered by both batteries and gasoline, the company that has its own acceptance in these documents is vulnerable to the whims of both modes.
Another notable risk the source acknowledges is that the hiring accounting firm that prepared its IPO, the Chinese pricing of PricewaterhouseCoopers, found that Li Auto lacked “sufficient financial literacy” և accounting Registration staff with relevant understanding of NASA. ” GAAP stands for “Accepted Accounting Principles” – a set of standards by which companies must define their financial statements.) According to PCAOB guidelines, Li Auto had to acknowledge that there was “reasonable probability that there is a significant misunderstanding of our company. Annual or interim financial statements will not be prevented or detected in a timely manner. ” Li Auto says it has hired additional staff to address this issue, but acknowledges that other accounting issues may go unnoticed.
In addition, Li Auto is classified as a “growing company” because it generated more than $ 1 billion in revenue last year under the Obama-era Jumpstart Our Business Startups (JOBS) Act. This means that it is already exempt from certain transparency requirements set out in the Sarbanes-Oxley Act 2002.
Risk factors such as these are partly the reason why lawmakers have raised the issue of Chinese companies being publicly sold in the United States. Li Auto is also aware of this. The Company acknowledges in its SEC documents that PCAOB will not be able to verify the audits performed by its auditors. As a result, Lee Ink says:[i]”Investors may lose confidence in the quality of our financial information, the procedures, and the quality of our financial statements.” And if the legislation? is: Acknowledging that Chinese companies are more closely regulated in listing on US stock exchanges, Li Auto admits that its share price may fall or it may have to leave the Nasdaq altogether.
If there is ever a financial problem, the shareholders will not have a big application. Li Auto, founder of Li Auto, has 73 percent of the vote.
Despite all this, Li Auto was interested enough to raise $ 1.1 billion, noticing the rise in its share price on the first night of trading on the Nasdaq. Maybe it’s the result of a new impetus in the launch of global electric vehicles, or maybe it’s just a side effect of the current volatility and unpredictability of the US stock market. Whatever the answer, Li Auto’s initial success, գումար the money raised by the other companies mentioned above should have discontinued EV startups that remain, like Byton և Faraday Future, wondering how they can swim this wave, like he did before!
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