China battery giant CATL's $5 billion Swiss listing delayed amid Beijing regulatory concerns, sources say

CATL's plan to raise at least $5 billion in Swiss global depository receipts has been delayed as Beijing regulators raise concerns over the large scale of the offering, three people with direct knowledge of the matter said.

CATL, the world's largest battery maker, had expected to receive approval for a listing in Zurich from the Chinese securities regulator by the end of January, said one of the sources. But the process is taking longer than expected, all three sources told Reuters.

A week after Chinese President Xi Jinping told CATL that he had mixed feelings about its status as the biggest player in a soaring business tracking the rise of electric vehicles around the world, the delay has come to light. Xi's comments came in a rare public intervention about one of China's most globally competitive sectors.

"I'm both happy and worried," Xi said of CATL's industry-leading position, according to official media. He added that he was glad about the company's expansion overseas but concerned about the risks of undercut domestic rivals.

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A new report from LMC Automotive says that Tesla faces tough competition from Chinese electric vehicle manufacturers, which could put pressure on the company's prices. The report says that Chinese EV makers are expected to increase their production in the coming years, which could lead to a "significant" increase in exports to other markets.Tesla is facing tough competition from Chinese electric vehicle manufacturers, according to a new report from LMC Automotive. The report says that Chinese EV makers are expected to increase their production in the coming years, which could lead to a "significant" increase in exports to other markets. This could put pressure on Tesla's prices.

CATL, which is worth about $139 billion by market value, is now expanding in Germany and the United States. It already controls 37% of the global battery market, according to its 2022 annual report. It supplies auto giants like Tesla, Volkswagen and BMW.

"The company has told the China Securities Regulatory Commission or CSRC, whose approval for the listing is required, that it plans to use the proceeds to fund its European expansion plans, especially the development of a plant in Hungary, one source said. The company could also use the funds to finance its expansion in the United States," the source said.

According to sources who wish to remain anonymous, CATL was aiming to list as early as May, but there is no new timetable for the deal to proceed.

Reuters could not immediately reach the CSRC for comment.

is a method of raising capital in which a company sells securities to a limited number of investors

A company raises capital through private placement by selling securities to a limited number of investors.

According to sources, the Chinese regulator is concerned about the large size of CATL's GDR offering.

The CSRC is also examining CATL's planned use of proceeds, sources said, adding the regulator has questioned the battery maker's need to raise so much money after it raised 45 billion yuan ($6.56 billion) in a jumbo domestic share placement in June.The CSRC is also examining CATL's planned use of proceeds, the sources said. The regulator has questioned the battery maker's need to raise so much money after it raised 45 billion yuan ($6.56 billion) in a jumbo domestic share placement in June, the sources added.

At the time of the placement, the company said that the proceeds would be used to finance the production and upgrading of lithium-ion batteries in four Chinese cities, as well as to enhance research and development.

According to Dealogic data, the private placement was the biggest equity capital market transaction in China last year and the second largest follow-on deal globally in 2022.

The GDR deal, at $5 billion, would be the largest listing by a Chinese company in Switzerland, according to Refinitiv data.

Last year, Chinese companies began listing on the Swiss exchange SIX through a cross-listing platform that allows companies to raise capital by issuing GDRs (Global Depository Receipts). In turn, Swiss companies can issue CDRs (Chinese Depository Receipts) on Chinese exchanges.

Since the launch last year, 11 Chinese companies have raised $3.66 billion from Swiss listings according to Refinitiv data.

GDRs (Global Depositary Receipts) are one type of fundraising that companies use to offer investors who are based outside of the firms' home country a chance to buy and trade the stock on shareholders' local exchanges.

Offshore investors are attracted to Chinese issuers' GDRs for a variety of reasons. For one, they can generally buy the shares with a 10% discount. Additionally, after 120 days of trading on European boards, they can freely convert them into corresponding Chinese shares. With much better liquidity on the domestic market, investors can exit more easily.

When investors transfer their capital from onshore to offshore, it consumes some of China's foreign exchange reserves. The issuers of the capital usually keep the proceeds raised for overseas use, which has made Chinese regulators less keen to wave through mega-GDR offerings, according to two sources with knowledge of the matter.