China’s largest battery maker, Contemporary Amperex Technology Co (CATL), has delayed its plan to raise at least $5 billion in Swiss global depository receipts (GDR) due to concerns raised by Beijing regulators over the scale of the offering. Three individuals with direct knowledge of the matter stated that CATL had expected to receive approval from the Chinese securities regulator by the end of January, but the process is taking longer than expected.
The delay comes a week after Chinese President Xi Jinping expressed mixed feelings about CATL’s status as the biggest player in the rapidly growing business of electric vehicles globally. Xi’s rare public intervention was related to one of China’s most competitive sectors. In response to a presentation by CATL’s chairman, Robin Zeng, Xi expressed concern about the risks as the company rapidly expands overseas and moves to undercut domestic rivals, despite being worth about $139 billion by market value and already controlling 37% of the global battery market.
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CATL supplies auto giants such as Tesla Inc, Volkswagen, and BMW. The company plans to use the proceeds from the GDR offering to fund its European expansion, particularly the development of a plant in Hungary, and potentially finance its expansion in the United States.
Sources said that the China Securities Regulatory Commission (CSRC) has concerns over the vast scale of CATL’s GDR offering and is examining the planned use of proceeds, questioning the battery maker’s need to raise so much money after it raised $6.56 billion in a domestic share placement in June. The private placement was the biggest equity capital market transaction in China last year and the second-largest follow-on deal globally in 2022, according to Dealogic data.
Chinese companies started listing in Switzerland last year after the launch of a cross-listing platform that allows companies to raise capital by issuing and listing GDRs on the Swiss exchange SIX. Swiss companies can issue Chinese Depository Receipts on the Chinese exchanges. Offshore investors are attracted to Chinese issuers’ GDRs as they can generally buy the shares with a 10% discount and freely convert them into corresponding Chinese shares after 120 days of trading on European boards, with better liquidity on the domestic market.
However, practices such as transferring capital from onshore to offshore have consumed some of China’s foreign exchange reserves, while issuers usually keep the proceeds raised for overseas use. Such practices have made Chinese regulators less enthusiastic about mega-GDR offerings, according to sources. At $5 billion, CATL’s GDR deal would be the largest such listing by a Chinese company in Switzerland, according to Refinitiv data. Since the launch last year, 11 Chinese companies have raised $3.66 billion from Swiss listings, Refinitiv data showed.
