HONG KONG (Reuters Breakingviews) – Asian capital markets are poised to pull all cylinders for the electric car boom. LG Chem kicks off the regional frenzy with its $ 10.7 billion battery spin-off. For now, investors have good reason to get started.
LG Energy Solution’s upcoming debut in the Seoul market puts it in pole position for being Asia’s largest initial public offering for 2022. The unit, which supplies Tesla and others, is set to secure the market. The share price at the top of the range, 300,000 won ($ 251), according to the financial publication IFR, for a valuation of some 60 billion dollars. Just $ 200 billion from Contemporary Amperex Technology, or CATL, would be a larger pure-play battery maker.
More and more such deals are being put in place as Asian supply chains scramble to keep up with soaring sales of electric vehicles. Bank of America analysts predict that demand for batteries is expected to more than quadruple to 1,556 GWh by 2025. High initial research and development costs, as well as rising prices for lithium, nickel and cobalt further lengthen the balance sheets.
Fellow SK On, who will follow LG closely, is set to raise $ 2.5 billion in a pre-IPO funding round this year, according to local media. The company recently unveiled a joint $ 11.4 billion investment plan with Ford Motor to increase battery capacity in the United States.
In China, the world’s largest electric vehicle market in terms of sales, CATL is targeting a $ 7 billion private placement while smaller China Lithium Battery Technology is considering a $ 1 billion bid in Hong Kong. Overall, at least $ 32.5 billion in fundraising from Asian electric vehicle companies is underway, IFR estimates. Sony is one of many others whose aspirations in the industry will also need the money.
Valuations are turbocharged. CATL, for example, is trading on a sparkling profit 64 times the 2022 forecast, per Refintiv, while Tesla’s 100 times higher multiple sets a breathtaking pace. And unlike Chinese tech, where recent crackdowns have dampened growth prospects, the global race to net zero means governments are fueling fund managers looking for greener options. For the Asian electric vehicle industry, it should be easy to fill the capital pools.
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– South Korea’s LG Energy Solution on Jan.3 opened books to investors to raise up to 12.8 trillion won ($ 10.7 billion) in the country’s largest initial public offering.
– The company will sell 34 million new shares at 257,000 won to 300,000 won per share. Parent company LG Chem will also sell 8.5 million secondary shares. At the top of the price bracket, LGES will be valued at 70.2 trillion won ($ 58.5 billion) on a fully diluted basis.
– The stocks are expected to be valued on January 14.
(Edited by Jeffrey Goldfarb and Katrina Hamlin)
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