Since the beginning of the year, companies in the field of electric cars have raised over 23 billion dollars in IPOs, according to the data of the Dealogic company. Many investors believe that the high demand and the expectation of the future development of the electric car market are the main reasons why it is among the only sectors that still manage to attract money to it. The point is that despite the demand and the issuances, the stock prices of most companies fail to disconnect from the market and the macroeconomic situation in the world. Now some of the companies had to lower their ambitions regarding recruitments and compromise on the prices of the issues.
what’s really the situation
According to John Wither of the investment company Pictet, “many companies, especially those that are no longer profitable or are burning cash, have no other option (other than to compromise). The companies need capital to grow, survive and to be relevant in the market.” In the end, these companies are growth companies, and in order to stand out and move forward in such a market, the new companies must raise a lot of capital and quickly, the big question for most of them is what is more important – to raise more money, which apparently will no longer happen in the same mass as in 2021 and until today, Or indeed lower the estimates and get what is possible as early as possible. It seems that many companies understand that the main goal is to get into the game as quickly as possible in the hope that the money they do manage to raise will be enough for them.
One of the examples of those companies in the sector that we were forced to compromise on their IPO is the Chinese car manufacturer Leapmotor. The company is seven years old and expected to raise 1.5 billion dollars in an IPO on the Hong Kong Stock Exchange, in the end the raising was only 800 million dollars. According to the company, the high amount it aimed for was supposed to be used for research and development, increasing production capacity and expanding the sales network. The company was issued on the stock exchange on September 29 and since then the company’s stock has managed to fall by about 28%. Another company that raised in the last two weeks was CALB, a Chinese electric battery maker that raised $1.26 billion in its third largest IPO of the year in Hong Kong.
What about companies that have already issued?
Another example of the state of the electric vehicle industry is a company
RIVIAN AUTOMOTIVE
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. The company made the largest IPO of an American company since Facebook – reaching a value of 153 billion dollars without selling a single car. Since the IPO, the company’s stock has fallen by more than 65%, when, like other companies in the industry, the emphasis is, as mentioned, on growth, the company presented in its reports a loss of $1.62 per share with revenues of $364 million. One of the catalysts that the company and probably the other companies in the field rely on is President Biden’s inflation relief law. The CEO of Rivian said that “Biden’s recently signed inflation reduction law prepares the ground for a fundamental change in the demand for electric vehicles. The measure will have a profound effect on both the rate of penetration of electric vehicles and the topology of the supply chain.”
Who recognizes the potential of the field and where is it mostly thriving?
Among the well-known entities that have recently been involved in the electric vehicle industry is the Goldman Sachs bank. The bank was involved in the IPO of the battery giant LG Energy Solutions, which in January raised more than $10 billion on the South Korean stock exchange, the stock exchange’s largest IPO to date. Another company in which the bank was involved is CATL, a company that is already registered in China but managed to raise an additional 6.7 billion dollars. Both companies are primary suppliers of Tesla and other electric vehicle manufacturers.
One of the biggest markets for electric vehicles today is the Chinese market. Despite the slowdown recorded in the Chinese economy, the demand for electric cars does not stop, apparently thanks to significant measures by the government such as subsidizing the cars or easing bureaucracy in the entire field. About a quarter of the two million cars produced in China in August this year were electric, 7% were hybrid cars. Despite all the positives, many lesser-known companies are having trouble keeping their heads above water due to the increase in the prices of the raw materials for the batteries and delays caused by problems in the supply chains.
In conclusion, in the meantime we are indeed noticing a slowdown in the companies’ ability to raise funds as we were used to seeing until very recently. It is likely that the companies that emerged from the growing global crisis will be the ones that will lead the field with a high hand in the years to come. Since the corona virus, we have seen recruitments at illogical levels, many companies offered little and received a lot in return, and only those who will be able to maintain innovation, while continuing to sell their products and generate income, will be the ones who will get through the coming period in peace, most likely they will also be the ones who will prosper after it.
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