China battery maker debut is weaker than it looks

CALB

06/10/2022 05:49

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are their own.)
       HONG KONG, Oct 6 (Reuters Breakingviews) - Shares of
China’s CALB  3931.HK , which makes lithium batteries for
electric cars, debuted flat following its $1.3 billion initial
public offering. Hong Kong’s largest listing of the year avoided
the fate of electric-car marque Zhejiang Leapmotor Technology
 9863.HK , whose shares crashed 34% when they started trading a
week earlier but the latest deal benefits from better
suspension.
    After pricing at the bottom of the range, cornerstone
investors ended up with half of CALB’s total offering. One of
the company’s suppliers, Tianqi Lithium  002466.SZ , bought into
the deal too, reciprocating CALB’s investment in its own Hong
Kong listing back in July. Leapmotor sold a lesser one-third of
its offer to cornerstones. 
    Beyond the deal itself, CALB enjoys strong state support.
There are links between the parent of its largest pre-IPO
shareholder and a U.S. sanctioned Chinese “military industrial”
entity, and it received government subsidies larger than the
battery maker's meagre net profit. Those connections could
hamper its ability to take international market share down the
road but in volatile markets, it’s useful to have friends. (By
Katrina Hamlin)
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 (Editing by Una Galani and Thomas Shum)
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