Contemporary Amperex Technology said its jumbo follow-on stock offering is "reasonable" taking into account the electric-vehicle (EV) industry cycle, after the fundraising drew ire from investors and a stock exchange query.
The world's biggest maker of lithium-ion batteries for EVs and a Tesla supplier is seeking 58.2 billion yuan (US$9.1 billion) as the stock skyrocketed in Shenzhen this year to an all-time high, turning the company into the nation's third largest by market capitalisation.
If successful, the offering would rank as the biggest domestic equity sale this year, surpassing state-controlled China Telecom's 54.2 billion yuan initial public offering in Shanghai in August after its delisting from New York.
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"The equity financing was decided on multiple factors, such as the industry trend, the company's financial conditions and demand for capital, which will help to expand businesses," CATL said in a statement late on Monday in response to the exchange's query. "Therefore, the size of the fundraising is reasonable."
The company, known by its acronym CATL, had earlier said the proceeds will fund five lithium-ion battery projects for the EV industry, support technology innovation and replenish its working capital.
The stock's 68 per cent rally this year has raised its market value to the equivalent of US$215.5 billion, trailing only those of liquor distiller Kweichow Moutai and No. 1 lender ICBC. Some investors have reduced their positions amid concerns the company is corralling more funds for more expensive acquisitions.
Overseas traders were net buyers of 2.73 million shares last quarter to raise their stake in CATL to 6.65 per cent, according to Stock Connect data. Private-equity firm Hillhouse Capital sold almost 8 million shares in that quarter, according to data provider Shanghai DZH.
CATL slipped 0.7 per cent to 590.60 yuan on Tuesday after closing at a record a day earlier, valuing the company at 153 times earnings. The stock may rise to 621.31 yuan in 12 months, according to the average price target of analysts tracked by Bloomberg.
CATL last month agreed to buy Canadian miner Millennial Lithium for C$376.8 million (US$297 million), outbidding home rival Ganfeng Lithium, as the race to lock up supplies heats up. Its fundraising, first unveiled in August, would allow it to capture the rosy outlook for EVs amid a global push to cut carbon emissions, it said.
"The company's growth potential will stand out amid the accelerating investments in new capacity," said Zhu Dong, an analyst at Ping An Securities.
Global deliveries of power EV batteries and storage batteries will probably rise by 10 fold through 2025, CATL said in the statement, citing industry data. Demand will be fuelled by rapid sales of green-energy cars, as major global economies set timetables on carbon neutrality goals.
China is the biggest market for EVs, which accounted for about 18 per cent of all car sales in August and is getting closer to the official target of 25 per cent by 2025. The US is aiming for 50 per cent of EVs in new car sales through 2030.
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