On March 4, 2024, Chinese electric vehicle maker BYD announced a significant milestone in its financial journey, successfully raising $5.59 billion through a primary share sale. This transaction marks the largest of its kind in Hong Kong in four years, underscoring the growing investor confidence in the automotive sector.
BYD sold a total of 129.8 million primary shares in this deal, an increase from the initially planned 118 million shares when the offering launched on Monday. This equity follow-on offering has been highlighted as the largest globally in the automotive industry over the past decade. The transaction's success reflects a positive trend in Hong Kong's financial market, particularly within the tech sector.
Among the key investors in this substantial share sale was the Al-Futtaim Family Office based in the United Arab Emirates. BYD indicated that a strategic partnership is in the works between the two entities, although specific investment amounts from the family office were not disclosed. This collaboration is part of a broader strategy as many Chinese automakers look toward the Middle East to bolster their overseas sales, despite the market being relatively small compared to China's.
Since 2022, BYD has rapidly ascended to become China’s largest automaker, leveraging its diverse lineup of affordable battery-powered vehicles. In 2024, the company reported total sales of 4 million cars, with over 90% of these sales occurring within China. Notably, BYD accounted for over a third of the sales of pure electric and plug-in hybrid vehicles in what is recognized as the world's largest auto market.
The shares were priced at HK$335.20 (approximately $43.11), reflecting a 7.8% discount from the stock's closing price of HK$363.6 on the previous Monday. The pricing strategy was marketed within a range of HK$333 to HK$345 per share during the accelerated book build. This offering has garnered increasing investor enthusiasm, bolstered by a high-level summit of tech executives led by Chinese President Xi Jinping and supportive signals from Chinese policymakers for the private sector.
BYD intends to utilize the proceeds from this share sale to enhance its research and development, expand its international footprint, supplement working capital, and cover general expenses. In February, the company launched an impressive lineup of 21 electric and plug-in hybrid models, priced competitively from $9,555, all equipped with its innovative God’s Eye smart driving system. This move is aimed at maintaining a competitive edge in the Chinese market.
Moreover, BYD is ramping up its export initiatives, with Brazil emerging as its largest overseas market in 2024. In Europe, the automaker has introduced new hybrid models to offset the impact of a 17% tariff on its electric vehicles in the region.
A recent analysis by Citigroup emphasized that raising funds offshore in Hong Kong would allow BYD to expedite its international expansion plans. While the company enjoys substantial free cash flow and net cash in China, challenges remain regarding currency transmission and the necessity of obtaining approvals for overseas capital expenditures. Analyst Jeff Chung noted that these factors contribute to the complexities of BYD's international financial operations.
As BYD continues to innovate and expand, its recent fundraising success and strategic partnerships position it well for future growth in the competitive automotive landscape.
