(Photo by HECTOR RETAMAL/AFP via Getty Images)
AFP via Getty ImagesChinese electric-vehicle maker Li Auto filed public offering documents Friday afternoon. It’s another electric vehicle option for investors looking for opportunities in the hot sector.
Li (ticker: LI) is planning to sell 95 million American depository receipts, or ADRs, to U.S. investors. The ADRs will be priced at $8 to $10 each. The company hopes to raise about $760 million to $950 million dollars from public investors.
Li is a Chinese company and foreign firms can join with U.S. brokers to raise money in U.S. market. Foreign firms list ADRs which, for U.S. investors, are similar to other stocks. One of Li’s ADRs will represent two shares of underlying Li stock.
Li makes electric SUVs. The company says it’s targeting the market for vehicles priced between RMB150,000 to RMB500,000 which works out to about $21,000 to $70,000. A Tesla (TSLA) Model X can cost about $100,000 in both the U.S. and China. Li Auto’s first model is a six-seater which began production in November 2019. So far, Li has delivered about 10,400 SUVs through the end of the second quarter.
At that volume, the company is similar in size to NIO (NIO), another Chinese maker of electric cars. NIO delivered 10,331 vehicles in the second quarter of 2020—an increase from the pandemic-affected first quarter.
The improvement is one reason NIO stock is on fire this year, rising 194% year to date, far better than comparable returns of the Dow Jones Industrial Average and S&P 500 as well as most automotive peers. Gains have pushed the company’s market capitalization above $14 billion.
If the stock offering prices in the middle of the suggested range, Li will be worth about $7.6 billion. There will be about 1.7 billion shares outstanding after the offering.
Taking deliveries from November 2019 through the end of the second quarter 2020, NIO is valued at, including debt, about $1.2 million per delivery. Li Auto’s comparable valuation is about $750,000 per delivery.
The Li Auto value excludes low-price stock options. Including those, the Li value looks more like $770,000 per delivery.
It looks like Li will come out at a discount to NIO. Tesla, by the same math, is valued at roughly $1 million per delivery which took place between November 2019 and June 2020.
China is the world’s largest new car market and the largest electric vehicle market, but charging infrastructure is still a challenge. NIO offers battery swapping to save time and alleviate charging headaches. Li’s strategy is a little different. It has a “range extender” technology which is a 1.2 liter turbo charged engine that runs an electric generator. It’s like having a portable iPhone charger with you on a long trip.
Both NIO and Li Auto aren’t profitable yet.
Write to Al Root at allen.root@dowjones.com
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