On January 19, Lixiang Automotive announced that it has entered into an H-share subscription agreement with Jinhua Industrial Fund, agreeing to issue and distribute a total of no more than 200 million H-shares at a subscription price of HK$43.8 per share. In addition, Lixiang Automotive has also entered into a domestic stock subscription agreement with Wuyi County Jintou. As a result, Lixiang Automotive has conditionally agreed to issue and distribute 10.035 million domestic shares to Wuyi County Jintou at a subscription price of RMB 39.86 per share. The subscription shares will be issued and distributed under general authorization.
Zero Run Automobile announced that, assuming a exchange rate of 1 Hong Kong dollar to 0.91006 yuan (12830$), Jinhua Industrial Fund will subscribe for approximately 5.0175 million H shares, with a total face value of 5.017 million yuan, and the total face value of the subscribed domestic shares is 10.035 million yuan. After completion of this subscription, the proportion of shares held by Zero Run Automobile’s largest shareholder, Group, will decrease from 23.47% to 23.21%; the shareholding of Zero Run Automobile’s founder Zhu Jiangming will be diluted from 6.93% to 6.85%; Stellantis, which previously planned to invest approximately 1.5 billion euros in Zero Run Automobile, will see its shareholding decrease from 21.26% to 21.02%; and the public shareholding of Zero Run Automobile will be approximately 51.55%. Regarding the subscription price, Zero Run Automobile stated that the subscription price is at a significant premium of nearly 70% compared to the average closing price of 28.31 Hong Kong dollars per H share on the Hong Kong Stock Exchange in the five trading days preceding the subscription agreement date, calculated based on the closing price of 25.8 Hong Kong dollars on January 19th. However, it is worth noting that on the first trading day after this announcement, Zero Run Automobile’s opening stock price rose by more than 8%, and then quickly fell by more than 10%, with an intraday fluctuation of over 18%, and the trading volume of the stock also exceeded 8.41 million Hong Kong dollars. As of the closing day, the stock price of Zeropao Motors fell by 12.6%, to HK$22.55 per share. Regarding the drop in Zeropao Motors’ stock price on January 22, Cao He, President of Quanlian Motor Investment Management Co., Ltd., told Daily Economic News reporters that it was related to the overall trend of the Hong Kong stock market that day. Car stocks in the Hong Kong stock market fell, with the stock price of Ideal Motors dropping by 4.99%, Xpeng Motors by 6.59%, and NIO by 6.71%. The announcement shows that the total amount of funds raised in this subscription by Zeropao Motors is HK$659 million, which is intended for research and development investment, marketing, production capacity enhancement, as well as operational funds and general corporate purposes. “The subscription is a strategic investment made by the investor, and is of the same nature as other recent strategic investments introduced by the company. This subscription demonstrates the support of Jinhua Industrial Fund and Wuyi County Jintou for the company’s new energy and smart electric vehicle business, as well as their confidence in the company’s long-term development and prospects. The subscription will also help establish and strengthen the company’s commercial and industrial cooperation in Wuyi County and Jinhua, including the layout of electric vehicle facilities and other similar commercial and industrial cooperation, which will benefit the company and the local economy of Wuyi County or Jinhua,” Zeropao Motors said.
It is worth mentioning that in October 2023, Zero Run Automobile announced that Stellantis Group plans to invest about 1.5 billion euros to acquire approximately 20% of Zero Run Automobile’s shares and obtain 2 seats on Zero Run Automobile’s board of directors. However, after the official announcement of this news, Zero Run Automobile’s stock price also fell, closing the day with a 10.87% decline. Subsequently, Zero Run’s stock price remained in a downward channel, closing at HK$27.1 per share as of October 31, 2023, a cumulative decline of 33.90% from the opening price on October 26, 2023. At that time, some views pointed out that the rumor of Stellantis Group’s investment in Zero Run Automobile had long been anticipated by the capital market, and the excitement of the capital market for the cooperation between foreign capital and domestic new car forces had already been hyped after Volkswagen’s investment in Xiaopeng Motors. “This mainly reflects that there are differences in the capital market’s views on the development path of new energy vehicle companies, and not all investors approve of the above-mentioned model,” Cao He believes that the sluggishness of Zero Run Automobile’s terminal market also affects its performance in the capital market. Data shows that in 2023, Lixiang Automobile delivered more than 144,000 new cars, a 29% increase over the previous year, but did not meet its annual sales target of 200,000 cars. Since 2023, Lixiang Automobile’s stock price has fallen by nearly 15%. In addition, despite continuous new financing measures, Lixiang Automobile has not been able to reverse its operating losses. Financial data shows that Lixiang Automobile’s operating loss in the third quarter of 2023 was 1.025 billion yuan, compared to 1.361 billion yuan in the same period in 2022, and 1.174 billion yuan in the second quarter of 2023. Based on the net profit for the first three quarters of 2023, Lixiang Automobile’s operating loss has reached 3.359 billion yuan. Furthermore, Lixiang Automobile’s cash flow situation has also deteriorated. Financial data shows that in the third quarter of 2023, Lixiang Automobile’s net cash flow from operating activities was 1.4 billion yuan, compared to 2.762 billion yuan in the second quarter of 2023, a difference of 1.362 billion yuan. In terms of free cash flow, Lixiang Automobile generated 1.018 billion yuan in free cash flow in the third quarter of 2023, a significant decrease from the second quarter of 2023. “Dolphin Research stated that although Zeropao’s operating cash flow turned positive for the second time in the third quarter of 2023, without continued financing, Zeropao may only have about a year left based on the actual cash consumption rate.”
Reporter learned that against this backdrop, starting in September 2022, Zhu Jiangming conducted comprehensive cost control and optimization for each department. By the fourth quarter of 2023, Neolix Motors had implemented three rounds of cost reduction measures, with a cost reduction of over 10,000 yuan (1410$) for mid-to-high-end models, excluding battery costs. “Our goal is to reduce absolute losses and increase the average gross profit margin per vehicle. We have set targets before, such as reaching 5% in 2024 and 10% in 2025, step by step. We hope Neolix Motors can maintain a certain level of losses in 2024 and achieve profitability by 2025,” Zhu Jiangming once told reporters.