Chinese electric vehicle (EV) battery giant CATL’s plan to raise at least $5 billion in Swiss global depository receipts (GDR) has been delayed as Beijing regulators voice concerns over the large scale of the offering.
CATL had expected to receive a green light for the listing in Zurich from the Chinese securities regulator by the end of January. But the process is taking longer than expected, three people with direct knowledge of the matter said.
The delay comes to light a week after Chinese President Xi Jinping told CATL that he had mixed feelings about its status as the world’s largest battery maker.
Xi’s comments came in a rare public intervention into one of China’s most globally competitive sectors. The Chinese president raised concerns about risks in the company’s rapid overseas expansion and moves to undercut domestic rivals.
Sources said the China Securities Regulatory Commission (CSRC), whose approval is required for the listing, has concerns over the vast scale of CATL’s GDR offering.
The CSRC is also examining CATL’s planned use of proceeds, sources said, adding the regulator has questioned why the battery maker needs so much capital, after it raised 45 billion yuan ($6.56 billion) in a jumbo domestic share placement in June.
CATL has told the CSRC that it plans to use the proceeds to fund its European expansion plans, sources said. The EV battery-maker, worth about $139 billion by market value, is expanding in Germany and the United States.
The Swiss GDR would go towards the development of a CATL plant in Hungary, one source said, and potentially even the company’s expansion in the US.
In early February, sources said CATL aimed to go ahead with the Swiss GDR as early as May. There is no new timetable for the deal to proceed, according to the sources, who said they could not be named as they were discussing private information.
When it raised its Chinese funding in June, CATL said the proceeds will be used to fund the production and upgrades of lithium-ion batteries in four Chinese cities, and enhance research and development.
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.
At $5 billion, the GDR deal would easily be the largest such listing by a Chinese company in Switzerland, according to Refinitiv data.
The CSRC did not immediately comment when contacted by Reuters. CATL did not respond to a request for comment.
Formally known as Contemporary Amperex Technology Co, CATL already controls 37% of the global battery market, according to its 2022 annual report. It supplies auto giants like Tesla, Volkswagen and BMW.
Forex reserve concerns
Chinese companies began listing in Switzerland last year after the country launched a cross-listing platform to allow companies to raise capital by issuing and listing GDRs on its exchange SIX. Swiss companies can also issue Chinese Depository Receipts on the Chinese exchanges.
11 Chinese companies have raised $3.66 billion from Swiss listings since the launch last year, Refinitiv data shows.
Companies often use GDRs to offer investors outside the firms’ home bases a chance to buy and trade the stock on shareholders’ local exchanges.
Meanwhile, 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 much better liquidity on the domestic market, investors can also exit more easily.
But when investors transfer the capital from onshore to offshore, it consumes some of China’s foreign exchange reserves while issuers usually keep the proceeds raised for overseas use.
Such practices have also made Chinese regulators less keen to wave through mega-GDR offerings, two of the sources with knowledge of the matter said.
- Reuters, with additional editing by Vishakha Saxena