Surprise! Electric Carmaker Xpeng to Issue More Shares

A cardinal rule of raising money in the public markets these days is strike while the iron is hot. Since its initial public offering in late August, one of the hottest irons has been China-based electric vehicle (EV) maker Xpeng Inc. (NYSE: XPEV).

Even a proposed offering of some 40 million American depositary shares (ADSs) announced Monday morning couldn’t weigh much on Xpeng’s share price. The ADSs (one ADS is equivalent to two Class A ordinary shares) initially traded down more than 5% before moving to more than 1% higher than Friday’s closing price of $49.34.

Xpeng’s secondary offering is underwritten by BofA Securities, Citigroup Credit Suisse and JPMorgan, and the underwriters have a 30-day option to purchase another 6 million ADSs.

The offering has not priced yet, but in the company’s Form F-1 filing, Xpeng estimates net proceeds of $1.94 billion ($2.23 billion if the underwriters exercise their options) at Friday’s closing price.

The company plans to use 30% of the net proceeds for research and development on Xpeng’s Smart EV and technologies and another 30% for sales, marketing and expansion in the company’s international markets.

The remaining 40% is split evenly between strategic investments in core technologies and general corporate purposes, including working capital.

Xpeng’s shares priced at $15 at the IPO, and after an initial bump to around $23, the stock didn’t top that number until November 4, when shares closed at $27.39. Since then the shares have nearly doubled, to trade Monday morning at nearly $50.

All this action for a company that sold just 4,224 vehicles in November and 3,040 EVs in October. For the first 11 months of 2020, Xpeng has delivered a total for the year to date of 21,341 units.

Ford Motor Co. (NYSE: F) sold just over 21,000 Explorers in the month of October alone and a total of more than 183,000 vehicles in the month. For the year through October, Ford has sold nearly 1.7 million cars and trucks. Ford’s market cap is around $36.9 billion, while Xpeng’s is around $35.3 billion.

The difference, of course, is growth. Xpeng’s year-over-year sales grew 342%, while Ford’s fell by 5.8%. For the year to date, Xpeng’s sales are up 87%, while Ford’s are down 16% through October. Over the past 12 months, Ford stock is up just 2.2%, even though it has added 131% since its trough on March 23.

At last look, Xpeng traded down about 1.5% to $48.66, in a post-IPO range of $17.11 to $74.49. The consensus price target on the stock is $54.72, implying a potential upside of about 12.5%.