SHANGHAI – China's EV hopefuls, auto suppliers and other startups, racing to bolster cash amid a period of profound disruption, are turning to a new pot to mine for precious capital.
The Shanghai Stock Exchange on July 22, 2019, launched its Science and Technology Innovation Board. Known as the Star Board, the new platform was designed to mimic Nasdaq in raising capital for technology companies.
A year later, while most of the listed companies are concentrated in the IT, biochemical and new materials sectors, the new board is becoming a major fundraising conduit for Chinese auto suppliers, automakers and electric vehicle startups.
Farasis Energy last week became the first EV battery maker to list on the Star Board, after completing an initial public offering that raised 3.4 billion yuan ($486.4 million).
The company, which ranked as China’s seventh-largest EV battery cell maker in 2019, will use the capital to ramp up output in China and build a plant in Bitterfeld-Wolfen, Germany.
Also last week, SinoHytec Co., a leading Chinese developer of hydrogen fuel cell engines, was approved by China’s stock market regulator to roll out a 1.2 billion-yuan IPO on the board. It plans to invest funds to expand output of hydrogen fuel cell engines used in buses at a Beijing factory.
In addition to auto suppliers, the Nasdaq-like board also is drawing widespread interest from Chinese vehicle manufacturers.
Last month, Hong Kong-listed Geely Automobile Holdings, the largest domestic Chinese passenger-vehicle maker, disclosed intentions to list on the board. Proceeds from the share issue will be used for business development and working capital, Geely said.
This week, EV startup Hozon New Energy Automobile Co. disclosed on its social media site that it expects to launch an IPO on the board sometime in 2021.
Hozon, incorporated in 2014, had sold more than 16,000 electric crossovers as of June. It is considered one of the few hopefuls among the numerous EV startups in China.
More EV startups and related suppliers are eyeing a listing on the Star Board, according to Chinese media.
That’s not surprising.
Unlike the main board of the Shanghai Stock Exchange, the Star Board does not require a listing candidate to have a recent track record of significant profits. An applicant is eligible for an IPO on the new board as long as it has proven strength in technology with solid business growth.
This is particularly appealing to young companies such as Farasis Energy, SinoHytec Co. and Hozon. The three companies are less than 10 years old. While SinoHytec became profitable in 2019, Farasis Energy and Hozon are still incurring losses.
Another attraction of the Star Board is the more simplified application process to execute an IPO compared with requirements on the main board of the Shanghai Stock Exchange.
It normally takes only a few months for a qualified candidate to get the go-ahead for an IPO on the new board. For the main board at the exchange, the waiting period is typically two to three years.
That helps explain why Geely intends to list on the Star Board. After making a series of acquisitions in and outside of China in recent years, the company doesn’t want to wait to obtain fresh capital for its sprawling business empire.
An additional factor working in favor of the Star Board: The Trump administration, targeting a big trade deficit and looking to protect American intellectual property, plans to further scrutinize and screen Chinese companies seeking to go public in the United States.
The move likely will prompt Chinese technology companies to abandon plans for a listing on Nasdaq or the New York Stock Exchange and opt to raise capital from a domestic bourse such as the Star Board.
