Geely Star Board Listing Hits Snag on High-Tech Concerns

Geely Automobile Holdings Ltd.’s push to list on Shanghai’s Nasdaq-style Star board has hit a snag with China’s stock market regulator questioning whether the company is high tech enough for the bourse, according to people familiar with the matter.

China’s No. 1 maker of local, branded cars received listing approval in September, believing it would offer a higher valuation than a second listing on the main board in Shanghai or Shenzhen, the people said, asking not to be identified because the details are private. Geely, whose parent is Zhejiang Geely Holding Group Co., is already listed in Hong Kong.

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Typically it takes companies less than three months from the time they received exchange sign-off to the time they get the green light from the China Securities Regulatory Commission to complete the registration process. Geely’s endeavors, however, come just as the CSRC is considering tighter rules for first-time Star board share sales. The regulator wants to ensure firms have technology credentials in line with its aspirations for the board and sound financial health so as to boost the quality of choice for investors, as well as protect them.

Representatives for Geely weren’t immediately able to respond. The CSRC didn’t immediately respond to an email seeking comment.

Geely, which reported a 32% decline in net income for 2020 on Tuesday, has recently been speeding up efforts to ink deals with technology firms. The company has made a slew of announcements over the past few weeks, forging major collaboration pacts with companies from Chinese search-engine heavyweight Baidu Inc. to Apple Inc.’s Taiwanese manufacturing partner Foxconn Technology Group and Tencent Holdings Ltd.

New EV Brand

Along with the JVs, the Chinese carmaker is investing $5 billion in a new electric-car battery plant, and launching a new EV brand -- Zeekr -- to take on Tesla Inc. and local upstarts.

Geely’s net income of 5.53 billion yuan ($850 million) for the year missed expectations of management and analysts alike after the company’s car sales were hit by the coronavirus pandemic in the early months of 2020. Revenue fell 5.4% to 92.11 billion yuan.

More than 230 companies have debuted on the Star board, or the SSE Science and Technology Innovation Board 50 Index, since it started in 2019, including giants such as Semiconductor Manufacturing International Corp. and Bloomage Biotechnology Corp.

PricewaterhouseCoopers forecast in January that at least 150 firms may seek a Star board listing this year, seeking as much as 210 billion yuan, nearly double the estimated amount of fundraising by Chinese main boards.

Electric carmakers from China and beyond have been tapping equity investors for money over the past 12 months, encouraged by the stunning rise in Tesla’s shares. Xpeng Inc. alone has raised more than $7 billion in under a year while Nio Inc.’s stock soared 1,100% in 2020.

The CSRC’s tighter rules aren’t aimed at any specific sector, but will make it harder for financial technology firms -- such as billionaire Jack Ma’s Ant Group Co. -- to list. By extension, a traditional car company that for years has been churning out gas guzzlers may also have a harder time proving it belongs on the board.

Geely sold about 68,000 new energy vehicles last year, or around 5% of its total. That’s well short of a goal set in 2015 to have 90% of sales consist of EVs by 2020. Rival BYD Co. by contrast got 44% of its sales from EVs last year.

Geely’s Hong Kong-traded shares have risen about 40% since early September, when it first filed a listing application with the Star board.

©2021 Bloomberg L.P.

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