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The company behind the battery factory in Debrecen would go public in Switzerland, but not everyone is looking at it favorably

One source said CATL had expected to receive approvals from China’s securities regulator for the Zurich listing by the end of January, but the process appears to be taking longer than expected.

The postponement of the launch comes a week after Chinese President Xi Jinping said of CATL that he had mixed feelings about the company being the biggest player in a business that is growing rapidly due to the global rise of electric vehicles. Responding to CATL President Robin Zeng’s speech at a Chinese parliamentary session last week, official media quoted Xi as saying, that he is “happy and worried at the same time” – happy about CATL’s industry leadership position, but worried about the risks as the company expands rapidly overseas while its domestic Chinese competitors fall behind.

In its 2022 annual report, CATL, which is worth about $139 billion in terms of market value, reported that it has a 37 percent market share in the battery market. The company is a supplier to companies such as Tesla, Volkswagen and BMW.

The company informed the China Securities Regulatory Commission (CSRC) – whose approval is required for the IPO – that the proceeds from the IPO will be used to finance European expansion, in particular, it intends to use it for the development of the Hungarian plant – said a source – and potentially the expansion in the United States would also be partially financed from this.

At the beginning of February, information leaked that CATL would do the IPO as early as May, but according to the sources, with the current slippage, there is no new timetable for the transaction.

According to the sources, Chinese regulators are concerned about the massive volume of CATL’s share issue and are looking into what the company would use the inflow of funds for. The regulator also reportedly questioned whether the battery maker really needed that much money after it raised 45 billion yuan in a large domestic share offering in June. The company said at the time that the proceeds would be used to finance the production and upgrading of lithium-ion batteries in four Chinese cities, as well as to boost research and development activities.

The private equity offering was the largest capital market transaction in China last year and the second largest offering globally in 2022, according to Dealogic.

At $5 billion, the GDR deal could easily be the largest IPO of its kind by a Chinese company in Switzerland, according to Refinitiv data. Chinese companies began listing in Switzerland last year after launching a cross-listing platform that allows companies to raise capital by issuing and listing global depository receipts (GDRs) on the Swiss stock exchange. On the other hand, Swiss companies can issue CDRs (Chinese Depository Receipts) on Chinese stock exchanges.

Foreign investors are attracted to the GDRs of Chinese issuers because they can usually get them at a 10 percent discount, and after 120 days of trading on European stock exchanges, they can freely exchange them for the corresponding Chinese shares. Since the liquidity in the Chinese market is much better, it is easier for investors to exit.

However, when investors move capital from domestic to offshore, it eats up some of China’s foreign exchange reserves, while issuers tend to retain capital raised for overseas use. Such practices have also made Chinese regulators less enthusiastic about large-scale GDR transactions, said two sources familiar with the matter.

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