Article | Li Yifan
NetEase, JD.com, Ctrip, Baidu... this summer's Chinese concept stocks are performing an escape drama on Wall Street.
But there are also warriors who swim against the current.
On June 1, according to "36Kr", Xpeng Motors is submitting IPO documents to the US stock market, planning to raise US$500 million and is expected to be listed between July and September this year. At present, Xpeng Motors has hired investment banks such as JPMorgan Chase and Goldman Sachs, among which JPMorgan Chase is the main underwriter.
Although Xpeng Motors did not make a clear position on this report, replying: "We will not comment on market rumors." However, it can be seen from many details that Xpeng's IPO in the United States is very close.
However, due to increasingly stringent US stock listing thresholds and multiple pressures from lawsuits, Xpeng is now in a completely different situation from NIO when it landed on the New York Stock Exchange two years ago.
Timing is needed
In fact, as early as 2019, the news that Xpeng was about to IPO in the United States was no longer new news. But now, this is the closest they have ever been to the U.S. stock market.
We can see Xpeng’s imminent urgency from the following three progresses.
The first is the completed VIE structure.
Some people may not know what the VIE architecture is. In layman's terms, VIE structure is more like a financial concept.
It refers to the establishment of a shell company abroad or overseas, which completely controls the domestic company by signing a series of agreements with the domestic company. In this way, domestic companies can continue to operate as domestic capital in China, avoiding the supervision of foreign investment by domestic regulatory agencies; the overseas status of shell companies can package their overall assets and allow them to be traded in the United States or other overseas capital markets. financing or listing.
Companies such as Sina, NetEase, Baidu, Alibaba, and Weilai have all successfully landed on U.S. stocks by building VIE structures. Therefore, in the eyes of industry insiders, establishing a VIE structure is basically the most obvious move for Chinese companies to go public in the United States.
In recent months, a lot of what Xpeng has done is obviously to build a VIE structure.
Since December last year, 47 shareholders of Guangzhou Chengxing Zhidong Automobile Technology Co., Ltd. (hereinafter referred to as "Chengxing Zhidong"), Xpeng's operating entity, have pledged all their shares. The rights holders are Guangdong Xiaopeng Automobile Technology Co., Ltd.; last month, 27 shareholders including Alibaba, He Xiaopeng, and Xia Heng also withdrew from the ranks of shareholders.
This means that Chengxing Zhidong is fully owned by Guangdong Xiaopeng Automobile Technology Co., Ltd.
Guangdong XPeng Automotive Technology Co., Ltd. is wholly owned by XPeng? (Hong Kong)? Limited, a company registered in Hong Kong.
This kind of operation is to build a VIE structure nakedly.
The second is the newly launched production qualification.
On May 19, the former Guangdong Fudi Automobile Co., Ltd. officially changed its name to Zhaoqing Xpeng New Energy Investment Co., Ltd. Xpeng Motors successfully obtained the automobile production qualification, and the Zhaoqing factory will also become Xiaopeng P7's independent production base.
Obviously, this is a good story that the capital market likes and allows investors to imagine an increase in valuation.
Third, it is a tight capital chain.
Xpeng’s last financing was in November 2019, Series C, worth US$400 million.
Since then, there has been no financing in seven months. At the same time, Xpeng’s Zhaoqing factory invested 4 billion yuan, and the newly launched Xpeng P7 also began mass production and burned money.
Not long ago, "New Fortune" announced the 2020 New Fortune 500 Rich List, and He Xiaopeng fell directly off the list.
Building a car is a money-burning game. Therefore, going public to raise money is a move that Xiaopeng will take sooner or later.
In fact, for the entire new car-making forces, 2020 is a year of life and death. They have become less and less favored by venture capital and private equity. Those who are owed wages, those who are bankrupt, and those who are disappearing. go into hiding.
Even Weilai, which had a halo IPO in 2018, has seen its stock price drop by 10% in the past two years (calculated based on the stock price on the day of release). In 2019, it was even on the verge of delisting at one dollar.
But looking at it on the other hand, it is precisely because of this that as the car-making craze fades, the more companies like Xiaopeng stay until the end, the more they actually have core technologies and advantages in the field of new energy vehicles. Strong enterprises - the so-called "leftover" are king.
So going public now is both a need and the time has come.
Behind the opportunities, there are more challenges.
On the one hand, after Luckin Coffee’s fraud, the explicit and implicit obstacles to Chinese companies’ IPOs in the United States have greatly increased; on the other hand, Tesla and Xpeng’s “commercial secret theft” lawsuit also plays a role in A character with hidden murderous intentions.
Tesla: A time bomb
In a roundabout way, the lawsuit between Tesla and Xpeng employee Cao Guangzhi has been going on for more than a year.
In March last year, Tesla filed a lawsuit against former employee Cao Guangzhi in California for "commercial theft of secrets", claiming that he took away a large amount of confidential information on autonomous driving when he resigned, and that he had been As Cao Guangzhi’s current employer, they asked Xiaopeng to cooperate with relevant investigations as a third party.
Although Xiaopeng said that it had no knowledge of the "secret theft" and would not steal any trade secrets from Tesla, it still had to cooperate with the investigation.
However, the contradiction has not weakened.
In Tesla’s latest investigation request, they asked Xiaopeng to disclose nearly 30 items including the source code of autonomous driving, computer file backups of all employees, and relevant information about employee Zhang Xiaolang.
Xpeng believes that these contents seriously cross the line, and Tesla seems to be more interested in using this lawsuit to disrupt its business operations rather than discussing the matter. While accusing Tesla of "bullying," they filed an opposing motion with the court.
If you think about it, autonomous driving is one of the core technologies of car companies. How can the source code be handed over to competitors at will?
On May 27, the local court in the United States approved part of Xiaopeng’s objection motion.
So the lawsuit involving Tesla and Xpeng as third parties is still in a tense state.
We consulted legal professionals about the possible impact of this lawsuit on Xpeng’s IPO. The other party told us that since the lawsuit is not an ordinary dispute, but involves the theft of core technology and business secrets, it will inevitably affect the due diligence process of the IPO. Moreover, once Tesla strikes again on the eve of its IPO, the consequences will be even more unpredictable.
In recent years, there have been many cases of companies delaying or failing to go public due to patents, litigation and other reasons during the IPO process, and even large-scale listings such as Facebook, Pinduoduo, JD.com, Sogou, and EHI Car Rental Companies have all experienced litigation before IPO due to disputes over trademarks, patents, copyrights, assets, operations, etc.
Whether these lawsuits involving core business content will have an impact on the IPO mainly depends on the substantial impact of the lawsuits on the company's production operations and shareholder rights. For example, in the case of Xpeng, the question is whether the outcome of the lawsuit will affect the production and sales of Xpeng Motors, and whether the shareholders' rights and interests will be greatly damaged due to huge compensation.
As for how to judge the extent of the impact, the exchange has very large discretion and is difficult to quantify. However, judging from the results, if the impact is extremely large, it will not be listed at all; if the impact is minimal, the normal process will be followed; if it is somewhere in between, the listing will be postponed after rectification.
For example, Pinduoduo received a lawsuit from a diaper manufacturer before its IPO, and was "ordered" to make rectifications before IPO. Although it hardly slowed down its normal listing pace at the time, the lawsuit had a considerable impact on Pinduoduo’s valuation.
This is also Xiaopeng’s current hidden danger. Once Tesla launches another attack on it on the eve of its IPO, and the US media once again adds fuel to the fire, then under the huge crisis of trust, even if Xpeng passes the listing qualification review threshold, the market valuation will be greatly affected.
Tesla is like a time bomb on the road to Xpeng’s IPO. Once it explodes, it may cause massive hemorrhage.
Luckin: The King of Back Legs
However, even without Tesla, is now a good time for Xpeng to go public in the United States?
Not necessarily.
Originally, the Sino-US trade friction that has intensified since 2019 has been a major obstacle for Chinese companies to IPO in the United States.
On May 23, 2019, Trump directly declared that he would "stop all Chinese companies' IPOs in the United States and restrict Wall Street's investment and financing of Chinese companies." On September 29, 2019, Trump said that he was considering delisting Chinese companies from U.S. stock exchanges.
As soon as the news came out, the capital market reacted, and most Chinese concept stocks fell in response.
After Ruixing’s fraud was exposed this year, Chinese concept stocks and Chinese companies are facing a dark moment. The story and business model have begun to face more doubts, and the issue price, stock price, financing, and valuation amounts have , and are about to or are experiencing the risk of being castrated.
Not only is the attitude of the U.S. authorities towards Chinese companies listing in the U.S. worsening, but short-selling institutions are also pursuing Chinese concept stocks.
On April 23, Jay Clayton, chairman of the U.S. Securities and Exchange Commission (SEC), publicly reminded investors directly on television media not to invest in Chinese concept stocks. This is the first time ever.
On May 21, the U.S. Senate passed the "Foreign Company Accountability Act." The bill requires that foreign issuers that fail to meet the U.S. Public Company Accounting Oversight Board (PCAOB)'s accounting firm inspection requirements for three consecutive years and cannot prove that they are not controlled by foreign governments will be prohibited from trading their securities in the United States.
However, how to identify the so-called "government control" is not stated.
There is no doubt that these policy risks are a huge negative for Chinese concept stocks.
Especially for Xiaopeng. Originally, the impact of pre-listing contamination lawsuits on the IPO was relatively vague, and the outcome was completely in the hands of the other party. Coupled with the current policy uncertainty, the risk of listing has increased significantly.
This is a bit like the U.S. stock market in 2010. Because some Chinese concept stocks were exposed for fraud, other Chinese concept stocks began to suffer from crazy short selling and hunting in the U.S. capital market, resulting in heavy discounts. For example, Vipshop, which was listed in 2012, was known as a "bleeding listing" at the time, with an extremely low valuation. It did not return to a more normal valuation level until 2014.
Therefore, after "Luckin Gate", in addition to many Chinese concept stocks plummeting, many companies that had originally planned to IPO in the United States also suspended their plans.
Recently, Chinese concept stock companies such as JD.com, Baidu, and Ctrip have all prepared to apply for listing in second places. NIO’s Li Bin also said recently that there is the possibility of a secondary listing in China’s capital market.
Of course, not all companies listed in the United States after the "Luckin Gate" were wiped out.
Kingsoft Cloud, which landed on Nasdaq on May 8, is the only "survivor" after the "Luckin Gate". On the day of listing, Wang Yulin, CEO of Kingsoft Cloud, confidently stated that the company’s listing process was not as difficult as outsiders imagined, and it was not subject to additional procedural review by the SEC or Nasdaq. “The Luckin incident is an extremely isolated phenomenon and has not affected investment. Investors’ interest and confidence in Chinese concept stocks as a whole.”
However, just 11 days after Kingsoft Cloud landed on Nasdaq, new turbulence occurred in the US stock market.
On May 19, Nasdaq once again put forward new requirements for companies that want to IPO for the first time. For example, it requires that the IPO financing amount of the company must reach more than 25 million U.S. dollars, or at least four percent of the post-listing market value. One, as well as requiring accounting firms to ensure that their reports comply with international accounting standards, among others.
This is the first time that Nasdaq has set a minimum amount for IPO size, and its impact on Chinese companies cannot be underestimated.
According to Refinitiv, a provider of global financial market data and infrastructure, 40 of the 155 Chinese companies listed on Nasdaq since 2000 have IPO financing The amount is less than US$25 million. This shows the threshold behind this number.
So, can Xiaopeng, which has been plagued by external and internal troubles, really overcome this time?
There was a popular saying on Nasdaq: Any company can be listed, but time will tell.
Now it seems that, at least for Chinese companies, the first half of the sentence seems to have been rewritten.
Just, so what? After all, we are living in the economic recession of 2020. If we are not active in listing, we will have problems surviving. Even if the enemy is outnumbered, the general will still have to fight~
This article comes from the author of Autohome's Chejiahao and does not represent the views and positions of Autohome.