How the trade war shaped Chinese battery giant's Hong Kong debut

CATL, the biggest EV battery maker, raised about $4.6 billion in the world's largest IPO this year

By Alexandra Stevenson

 

It is the world’s biggest maker of batteries for electric cars. It is expanding its business globally. And it is one of China’s most strategically important technology companies. 

But when Contemporary Amperex Technology Ltd, or CATL, started selling shares for the first time in Hong Kong on Tuesday, surging 16 per cent, American investors were largely shut out. It was the world’s biggest stock listing so far this year, according to the data provider Dealogic. Tensions between China and the United States (US) pushed CATL to shut US onshore investors out of its share sale, the first outside of the Chinese mainland, where it is listed in the city of Shenzhen. That some of the world’s most active investors were absent from one of the most anticipated trading debuts so far this year underscored the deepening rift between the US and China. 

 

CATL has found itself caught in the crossfire as Washington and Beijing have lobbed sanctions, blacklists and tariffs at each other. It was labeled a Chinese military company by the Pentagon. US lawmakers called on its Wall Street bankers to back out of the Hong Kong listing. And it has been hit with tariffs. 

The exclusion of American investors in Hong Kong’s splashiest stock sale of the year marks a dramatic reversal from a decade ago when Alibaba, the Chinese e-commerce giant, elicited cheers from traders as it went public on the New York Stock Exchange in 2014. The company raised $21.8 billion, delivering a big payday for Wall Street banks and minting mom-and-pop investors. 

“We are headed toward full financial decoupling with China,” said Stephen Roach, an economist and a former chairman of Morgan Stanley Asia based in Hong Kong. “Congress is driving the process of disengagement,” he said. The shares of Chinese companies that are traded in the US could be the next thing to come under fire, he added. 

The US government has targeted Chinese companies as it moves to limit China from accessing American markets out of national security concerns, a policy that Trump began in his first term and which President Joseph R. Biden Jr continued.  CATL, based in the southern China city of Ningde, supplies electric car batteries for General Motors, Tesla and more than a dozen global carmakers. Its technological advances have made lighter and cheaper batteries that can charge faster. The company said that it will use the funds raised in Hong Kong to help with its expansion in Europe, where it is building a new factory in Hungary to supply batteries to European automakers like BMW, Volkswagen, and Stellantis. 

Among its biggest investors are Kuwait’s sovereign wealth fund and the American firm Oaktree Capital Management. Another major investor is Hillhouse Capital Management Group, which was founded by the Chinese investor Zhang Lei. CATL moved to hive off American investors ahead of the listing as tensions between the US and China spiked. It said last week that it had changed the share sale to what is known as a Reg S offering, which prevents the sale of stock to onshore US investors and exempts it from having to make certain regulatory filings in the US. 

The company did not explain why it changed the structure of its listing, but it has cited geopolitical tension as one of the risks to its business. “We face risks associated with changes in trade policies or tariff regulations,” CATL said. 

 

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