ZEEKR Intelligent Technology Holding Limited (ZK), affiliated with Geely Auto, is looking to raise $50 million through an initial public offering (IPO) in the United States, according to a filing with the Securities and Exchange Commission (SEC) on Today. The company, which specializes in new energy vehicles (NEVs), has shown resilience with resumed top-line growth and a reduction in operating losses despite recent market challenges.
Founded by Li Shufu, chairman of Geely, just two years ago, ZEEKR has quickly risen in the competitive NEV landscape. The company's Zeekr 001 model has become China's best-selling premium model in the first nine months of 2023. However, it has not yet entered the top 10 NEV makers by the China Passenger Car Association (CPCA).
ZEEKR reported selling over 13,000 vehicles in October and disclosed a net loss of 3.87 billion yuan for the first half of the year. While its revenue grew fivefold in 2022 from the previous year, growth has slowed due to China scaling back government incentives. Despite these setbacks, CEO Mr. Conghui An is steering both Geely Auto and ZEEKR towards expansion, including plans for additional models and leveraging online and offline marketing strategies.
The company's financials highlight uneven revenue growth but an improving gross margin and reduced operating losses. ZEEKR boasts a positive cash flow from operations, contrasting with negative free cash flow for the twelve months ended June 30, 2023. The firm plans to reinvest future earnings for growth rather than paying dividends and is prepared for significant capital expenditures even as it uses operating cash.
ZEEKR filed for its U.S. IPO without explicit approval from China’s securities regulator, CSRC, likely moving forward based on verbal assurances. The move comes at a time when U.S. regulators are testing a cooperation agreement with their Chinese counterparts for companies like ZEEKR.
The market value of ZEEKR fell from a peak of $13 billion in February to around $10 billion. Noteworthy investments include $100 million from Intel (NASDAQ:INTC) Capital and $10 million from Mobileye Global (NASDAQ:MBLY) founder Amnon Shashua.
China remains a critical market for NEVs, accounting for about 60% of global sales of battery-powered vehicles. ZEEKR considers Nio (NYSE:NIO), BMW (ETR:BMWG), and Mercedes as its main competitors at the premium end of this market segment. Currently, only BYD (SZ:002594) operates profitably among many domestic players in China.
The IPO is underwritten by major financial institutions such as Goldman Sachs, Morgan Stanley, BofA Securities, and CICC. Geely Auto may also purchase shares in a private placement at the IPO price concurrent with the public offering.
The market opportunity for battery electric vehicles (BEVs) is substantial; however, there are concerns that growth may decelerate due to high BEV prices and an unpredictable regulatory environment in China. Additionally, the global higher cost of capital environment poses risks to ZEEKR's expansion plans.
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