Leapmotor to Raise $1B in Hong Kong IPO, Starts Trading on September 29

On September 20, Leapmotor, a Hangzhou-based smart electric vehicle brand, announced through the Hong Kong Stock Exchange (HKEx) that it will issue 131 million shares at a price of HK $48 to HK $62 ($6.12 – $7.9) per share. It will start trading on September 29. Given the upper limit price of HK $62, the market value of Leapmotor is about HK $70.848 billion ($9.03 billion), and the highest fundraising through this IPO could be as much as HK $8.1 billion ($1 billion).

Leapmotor was established in December 2015. Two years later, it released its first mass production model, S01, an all-electric car, and has been offering it since June 2019. Since then, the company has successively launched three models, including the electric supermini T03, mid-size electric crossover SUV C11 and mid-size sedan C01. The firm has completed the planning of three major vehicle platforms, namely the S, T and C platforms.

According to public information, up to now, Leapmotor has completed seven rounds of financing, and at least 12 billion yuan of financing has been completed. Its investors include Sequoia China, China Capital Investment Group (CCIG), Hangzhou Municipal Government Venture Capital Fund, China Capital Management, SDIC Chuangyi, Honghua Capital and Shanghai Electric.

Compared with NIO, Li Auto and XPeng Motors, which successfully made IPO debuts earlier, Leapmotor is slightly lower key. Since the second half of 2021, it has gradually realized a jump in sales volume. In August this year, the delivery volume of Leapmotor was 12,525, an increase of over 180% year-on-year. Its delivery reached a new high for four consecutive months, and the delivery volume in August ranked second among the newly established new energy car companies. From January to August, its cumulative delivery volume was 76,563 vehicles, which exceeded many new carmakers. According to Frost & Sullivan’s analysis, given the delivery volume, Leapmotor is the fastest growing company among the new electric vehicle companies in China.

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However, since the second half of 2021, the prices of power batteries, steel and aluminum and other raw materials have continued to rise, and the entry-level new energy vehicle market that Leapmotor focuses on is under great pressure. Although its sales volume continued to increase significantly, the net loss of Leapmotor continued to expand from 2019 to 2021, and the corresponding net loss in the three years were 901 million yuan, 1.100 billion yuan and 2.846 billion yuan respectively. The corresponding adjusted net loss was 810 million yuan in 2019, 935 million yuan in 2020 and 2.629 billion yuan in 2021. Given the sales volume of 43,000 vehicles in 2021, the loss of each car sold by Leapmotor totals about 60,000 yuan.

The high net losses also indicate the high R&D expenses of Leapmotor. According to the company’s prospectus, in 2019, 2020 and 2021, its R&D expenses of were 358 million yuan, 289 million yuan and 740 million yuan respectively, accounting for 306.4%, 45.8% and 23.6% of total revenue respectively.

It is worth mentioning that, up to now, Leapmotor has realized self-development and self-production of various electronic components such as electric drive, BMS, perception, calculation and control, and has the iterative capability of rapid mass production. This is also its core advantage that sets it apart from other new carmakers. According to Frost & Sullivan, Leapmotor is the only new energy automobile company in China with independent full-link R&D capability.