Li Auto updated its prospectus in the early morning of July 25 and publicly issued 95 million American depository shares (ADSs) to U.S. investors with an issue price ranging from $8 to $10 per ADSs.
The company expected to receive net proceeds of about $813.2 million to $936.4 million from this offering, with $760 million to $950 million based on the IPO price range from public investors, and $380 million from its concurrent private placements, Li Auto said in its filing. 50% of the net proceeds expected from this offering will be used for capital expenditures, 40% for R&D of new products, and the rest for general corporate purposes and working capital.
Among potential investors, Hillhouse Capital has shown a strong inclination to purchase an aggregate of up to $300 million, according to the prospectus. Based on the midpoint of the IPO price range of $9, if they invest, Hillhouse Capital will subscribe for 33.33 million ADS shares, accounting for 35.1% of the total shares issued by the Li Auto IPO.
Hillhouse Capital also participated in the $500 million C+ round of financing announced by Xpeng Motors, another fledgling domestic EV-marking force, whose overall listing plan is reported to be completed between July and September this year.
According to the prospectus, certain existing shareholders have agreed to purchase a total of $380 million in Class A ordinary shares with $300 million by China’s food delivery giant Meituan Dianping’s affiliate Inspired Elite Investments Limited, $30 million by ByteDance (HK) Limited, an affiliate of China’s leading tech giant ByteDance, $30 million by Zijin Global Inc., an affiliate of Li Auto’s director Xing Wang, and others.
In addition to disclosing the amount of fundraising, Li Auto added the second-quarter financial report as of June 31 in the updated prospectus.
Li Auto’s second quarter (Q2) revenue reached 1.9 billion yuan ($275 million), an increase of 128.6% from the previous quarter’s revenue of 851.7 million yuan. The company delivered 6,604 vehicles in Q2, an increase of 128% from Q1.
The increase in deliveries also led to an increase in gross profit margin from 8% in Q1 to 13.3% in Q2, which was mainly due to the increase in product sales and the dilution of manufacturing costs.
In addition, operating cash flow turned positive to 451.7 million yuan. In comparison, Li Auto’s first-quarter operating cash outflow was 63 million yuan. Pandaily reported earlier that Li Auto had negative cash flows and has not been profitable since inception. It incurred net losses of 1.5 billion yuan, 2.4 billion yuan, and 77.1 million yuan in 2018, 2019, and 2020 Q1, respectively. In the second quarter this year, the net loss reduced by 1.9 million, a decrease of 2.4% from Q1.
With the rising demand of expanding its economic scale, including the production ramp-up of Li ONE and the expansion of retail stores, delivery and servicing centers, Li Auto addressed that the investments “may not result in revenue increase or positive net cash flow on a timely basis, or at all.”
As of June 31, Li Auto owns 21 retail stores, 18 delivery centers, and 17 service centers nationwide, with 700 sales and service personnel.
Catering to the market with inadequate charging facilities, Li Auto designed its first and sole model, Li ONE, a six-seat, large premium electric SUV, with its energy replenishable by slow charging, fast charging, and refueling, ramped up production in November 2019, and delivered in June this year.
The company plans to launch a full-size premium electric SUV equipped with the next-generation EREV powertrain system in 2022.