Asia-Pacific Secondary Equity Issue: CATL’s Rmb45bn A-share private placement

IFR Awards 2022
3 min read
Fiona Lau

Powering up
Chinese electric vehicle battery maker Contemporary Amperex Technology’s Rmb45bn (US$6.55bn) A-share private placement drew significant demand from foreign investors in a year when China domestic offerings dominated the global equity capital markets.

CATL’s successful follow-on highlighted the kind of global interest a top-quality A-share listed company can attract despite challenging market conditions. It also showed China’s equity investment channel for foreign investors could accommodate huge demand, paving the way for more mainland-listed companies to follow.

The deal, the largest ever A-share marketed follow-on and the largest follow-on globally in 2022, hit the market in June when global stock markets were weighed down by Russia’s invasion of Ukraine, China’s sharp economic slowdown and global inflation worries.

Marketing of the placement started on June 13, and it priced on June 15, hours before the US Federal Reserve raised its benchmark interest rate by 75bp in its most aggressive hike since 1994.

Despite these uncertainties, foreign investors still wanted exposure to CATL, the world’s largest EV battery maker, knowing there had already been a deep correction in the share price before launch. Shares of ChiNext-listed CATL hit a record high of Rmb692 on December 3, 2021 but closed at Rmb443.03 on June 13.

The floor price was set at Rmb339.67 as Chinese regulations require it to equal 80% of the preceding 20 trading day average. Most A-share private placements are done at the floor price but CATL managed to price the deal at Rmb410 per share, representing a 7.2% discount to the close of Rmb441.82 on June 14 but a 20.7% premium to the floor price.

The deal drew tremendous demand, with a subscription size of Rmb93.3bn, 2.07 times the deal size, from 42 orders. Total orders from offshore investors were Rmb28.9bn – the largest offshore subscription size among A-share follow-on offerings – and the total allocated amount was Rmb18.7bn or about 42% of the transaction.

Renowned international investors including Singapore state investors Temasek Holdings and GIC, Hillhouse Capital and Thai state-owned energy giant PTT participated in the transaction. Other foreign investors joined the deal through the Qualified Foreign Institutional Investor system.

The CATL shares were allocated to 22 investors. Apart from the portion sold to offshore investors, 12% of the shares went to mutual funds, 16% to insurers, 24% to securities brokers, and 6% to others.

Shares in CATL traded well after the placement, touching a high of Rmb563.50 on June 24. The stock has retreated since then following a correction in the broader markets.

China Securities was the sponsor, and joint bookrunner with CICC, Goldman Sachs Gao Hua Securities, UBS Securities and Huafu Securities.

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