Today: 16-04-2024

Geely Subsidiary's IPO: A Litmus Test for Geopolitical Boundaries and Acceleration Limits

"Hurdles on the Horizon: Zeekr's Geopolitical IPO Journey Faces Challenges in Global Expansion"

In a bid to raise approximately $500 million, Chinese electric-vehicle manufacturer Zeekr, a subsidiary of Geely Automobile, is gearing up for a U.S. initial public offering (IPO). However, the endeavor faces a litmus test of geopolitical boundaries, especially amid strained relations between Beijing, Washington, and Brussels. While Zeekr thrives in the Chinese market, with robust sales and diversified revenue streams, its plans for international expansion encounter obstacles that hinge on geopolitical dynamics.

Despite Zeekr's promising performance in China, where revenue more than doubled to 21 billion yuan in the first half of 2022, venturing into the U.S. market poses challenges. The company aims to develop a robo-taxi venture, contingent on improved diplomatic relations between China and the U.S. However, with tensions still prevalent, particularly in areas involving potentially sensitive data, the success of this venture remains uncertain.

In China, Zeekr faces regulatory hurdles as a foreign-invested automaker, requiring the company to rely on licensed partners for data management. Additionally, the prospect of expanding into Europe is complicated by the European Union initiating a probe into Chinese carmakers. Despite these challenges, Zeekr benefits from its association with Geely Automobile, a robust parent company within China's largest privately owned auto group, Zhejiang Geely.

The prospectus notes that "related parties of the Group" accounted for nearly half of Zeekr's accounts receivable and amounts due in the previous year. These related parties, major suppliers to Zeekr, pose both an advantage and a potential risk, particularly if diplomatic ties become strained.

As Zeekr charts its course towards a U.S. IPO and global expansion, the company's journey reflects the complex interplay of geopolitical dynamics, regulatory landscapes, and the intricate relationships within the automotive industry. The success of Zeekr's ambitious plans will depend not only on market dynamics but also on the evolving geopolitical climate shaping the global business landscape.

"Investor Caution Emerges: Zeekr's IPO Faces Skepticism Amid Valuation Concerns"

As Chinese electric-vehicle manufacturer Zeekr Intelligent eyes a New York IPO, investor apprehension surfaces, casting shadows on the company's ambitious plans for expansion. Owned by Geely Automobile, Zeekr aspires to utilize the IPO proceeds to broaden its product line, yet a closer look at valuation metrics prompts wariness among investors.

Comparable Chinese EV makers such as Xpeng, Leapmotor, and BYD serve as benchmarks, and their equity, averaging around 3 times last year's sales, becomes a focal point for assessment. Applying this valuation multiple to Zeekr suggests a potential worth surpassing $13 billion. However, concerns arise as Geely Automobile, retaining control post-IPO, holds a market capitalization of only $12.3 billion. This disjunction between Zeekr's perceived value and Geely's market cap raises questions about the feasibility and limits of Zeekr's IPO deal.

The market reaction to Geely Auto's Hong Kong-listed shares falling 2.9% on November 10 indicates early investor skepticism. The overall sentiment reflects the nuanced landscape surrounding electric-vehicle ventures and the delicate balance required to navigate IPO valuations.

Zeekr's public filing for a stock market listing revealed a net loss of 3.9 billion yuan ($534 million) for the first half of 2023, compared to a 3.1 billion yuan loss the previous year. Despite revenue growth of 136% to 21 billion yuan, with 13.2 billion yuan attributed to vehicle sales, uncertainties persist regarding Zeekr's ability to garner substantial IPO proceeds, speculated to be less than $500 million.

As Geely Auto endeavors to propel Zeekr into the global electric-vehicle arena, the IPO's reception in the financial markets becomes a crucial litmus test, showcasing the intricate dance between investor confidence, valuation considerations, and the aspirations of emerging players in the rapidly evolving electric-vehicle landscape."

In conclusion, Zeekr's pursuit of a New York IPO to fund its expansion is met with cautious optimism and investor skepticism. The valuation dissonance, as compared to other Chinese EV makers and its parent company Geely Automobile, raises concerns about the feasibility of Zeekr's ambitious plans. The early market response, marked by a 2.9% dip in Geely Auto's Hong Kong-listed shares, underscores investor apprehension.

The intricacies of Zeekr's financials, with a reported net loss for the first half of 2023 despite robust revenue growth, add to the complexity of the IPO landscape. As the deal is expected to raise less than $500 million, questions loom about Zeekr's ability to secure substantial funds for its envisioned expansion.

In the broader context, the IPO represents a critical juncture for Zeekr and serves as a litmus test for the market's reception to emerging players in the competitive electric-vehicle sector. The outcome will illuminate the delicate balance required to navigate valuation considerations, investor confidence, and the evolving landscape of the global electric-vehicle market.

As the IPO unfolds, the trajectory of Zeekr's valuation and market reception will undoubtedly influence future strategies within the electric-vehicle industry, providing insights into the challenges and opportunities faced by companies navigating the complex dynamics of the current financial and geopolitical landscape.