The prospectus lodged with the Hong Kong Stock Exchange details the sale of 117.9 million shares with a maximum offer price of HK$263 per share. The sheer scale of the deal underscores CATL's prominence in the burgeoning EV sector. Furthermore, the potential size of the offering could swell to approximately $5.3 billion if an offer size adjustment option and a greenshoe option are fully exercised, indicating robust investor interest and the possibility of increased capital inflow.
Investor sentiment surrounding CATL appears buoyant. Following the launch of the Hong Kong deal, the company's shares listed in Shenzhen experienced a notable 3.6% surge on Monday, reaching a six-week high. This gain outpaced the broader market, as China's blue-chip CSI300 index saw a more modest 0.9% increase, highlighting the specific investor confidence in CATL's prospects.
Data from Dealogic confirms the significance of CATL's fundraising efforts, positioning this IPO as the world's largest in 2025, surpassing JX Advanced Metal's $3 billion IPO in Tokyo this past March. Within the Hong Kong market itself, CATL's share sale represents the most substantial since Midea Group successfully raised $4.6 billion last year, further emphasizing the scale and impact of this listing on the local financial landscape.
The prospectus also revealed strong backing from cornerstone investors, with over 20 entities, including prominent names like Sinopec and Kuwait Investment Authority, committing to purchase approximately $2.62 billion worth of CATL shares. This significant cornerstone investment provides a solid foundation for the IPO's success and reflects institutional confidence in the company's future.
The offer structure includes an option to increase the number of shares offered by up to 17.7 million, potentially generating an additional HK$4.65 billion ($598.00 million). Moreover, a greenshoe option allows for the sale of a further 17.7 million shares, providing flexibility and the potential for even greater capital raising. The final pricing of the shares is anticipated to be determined between Tuesday and Friday, with the official announcement expected on or before May 19. Trading on the Hong Kong Stock Exchange is slated to commence on May 20.
A significant portion of the raised capital, approximately 90% or HK$27.6 billion, is earmarked for the construction of CATL's planned factory in Hungary. This strategic investment underscores the company's commitment to establishing a strong manufacturing presence in Europe, bringing battery production closer to key automotive clients such as BMW, Stellantis, and Volkswagen. The first phase of the Hungary factory, involving a 2.7 billion euro ($3.03 billion) investment, is on track to begin production this year, with construction on the second phase anticipated to commence later in 2025.
Interestingly, the offering price in Hong Kong represents a slight discount to CATL's Shenzhen-listed stock's closing price on Friday, assuming the maximum offer price of HK$263 per share. This discount could widen if the final pricing falls below this level, potentially attracting a broader range of investors. CATL also secured a waiver from the Hong Kong Stock Exchange, allowing it to forgo publishing a minimum offer price due to concerns about potential impacts on the trading of its existing Shenzhen-listed shares.
The share allocation details indicate that 109.1 million shares will be offered to institutional investors, while 8.8 million shares will be available for subscription by Hong Kong's retail investors, catering to a diverse investor base.
Navigating US-China Trade Dynamics
Notably, the prospectus revealed that U.S. onshore investors will be restricted from participating directly in the Hong Kong share offering. However, the filing clarified that many of these funds with offshore operations would still have the opportunity to invest.
Adding a layer of complexity, CATL was included on a U.S. Defense Department list in January, identifying Chinese companies allegedly working with China's military. CATL addressed this designation in its prospectus, stating that it is actively engaging with the U.S. department to rectify what it believes to be a "false designation." The company asserted that this listing "does not restrict us from conducting business with entities other than a small number of U.S. governmental authorities, thus is expected to have no substantial adverse impact on our business."
CATL's ambitious IPO and European expansion occur against the backdrop of ongoing trade tensions between the United States and China. While both nations recently hailed constructive talks in Geneva aimed at de-escalating their trade war, significant tariffs imposed by both sides remain in effect. CATL acknowledged the evolving nature of tariff policies in its prospectus, stating that it cannot currently "accurately assess the potential impact of such policies on our business" and that it will "closely monitor the relevant situation." This cautious acknowledgment highlights the potential risks and uncertainties that global trade dynamics could pose to CATL's international growth strategy.
In conclusion, CATL's massive Hong Kong IPO marks a significant milestone in the company's global expansion, particularly its push into the European market. The strong investor interest, coupled with the strategic focus on establishing local manufacturing capabilities, underscores CATL's ambition to solidify its position as a leading force in the EV battery industry. However, the company must also navigate the complexities of the ongoing US-China trade relations, which could introduce unforeseen challenges to its international operations and market access.