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BYD Raises $5.59 Billion in Hong Kong Share Sale
Largest Share Sale in Four Years
Chinese electric vehicle maker BYD has raised $5.59 billion through a primary share sale in Hong Kong, marking the largest such transaction in the city since 2021. The deal initially planned for 118 million shares but was increased to 129.8 million shares.
Market Impact and Share Performance
BYD’s Hong Kong-listed shares opened 8% lower following the sale, aligning with the discount at which shares were issued. The Hang Seng Index also declined by 1.5% on the same day.
Key Investor and Strategic Partnership
The United Arab Emirates-based Al-Futtaim Family Office participated as a key investor in the offering. BYD announced plans for a strategic partnership with the firm but did not disclose the investment amount.
Expansion in the Middle East and Global Market
Chinese automakers, including BYD, have been targeting the Middle East to expand overseas sales. However, the market remains smaller compared to China’s domestic automotive sector. In 2024, over 90% of BYD’s total sales of 4 million vehicles occurred in China, where it accounted for more than a third of electric and plug-in hybrid vehicle sales.
Pricing and Valuation
BYD priced its shares at HK$335.20 ($43.11) each, reflecting a 7.8% discount from the previous closing price of HK$363.60. The share offering was marketed in a price range of HK$333 to HK$345 per share.
Investor Sentiment and Policy Influence
The transaction reflects improving investor confidence in the Hong Kong and Chinese markets, particularly in the technology sector. A recent summit led by Chinese President Xi Jinping and policy signals of increased support for private enterprises have contributed to the positive sentiment.
Stock Performance in 2024
BYD’s Hong Kong-listed shares have surged by 36.38% in 2024, while its Shenzhen-listed shares have gained 27.4%. The company’s growth aligns with a broader recovery in the technology and automotive sectors.
Use of Funds and Expansion Plans
Proceeds from the share sale will be allocated to research and development, overseas expansion, working capital, and general corporate purposes. BYD is rapidly expanding its production capacity and workforce, aiming to sell between 5 million and 6 million vehicles in 2025. This would bring the company’s sales volume in line with General Motors and Stellantis.
Employment and Production Growth
As of early September, BYD employed nearly 1 million people, surpassing the workforce sizes of Toyota and Volkswagen. The company continues to invest in production facilities and workforce expansion to meet its ambitious growth targets.
Product Development and Competitive Positioning
In February, BYD launched 21 new electric and plug-in hybrid models, with prices starting at $9,555. These models feature the company’s “God’s Eye” smart driving system, aimed at maintaining competitiveness in the domestic market.
Challenges in International Markets
BYD has been expanding its export business, with Brazil emerging as its largest overseas market in 2024. In Europe, the company has introduced hybrid models to counter the impact of an additional 17% tariff on its EVs.
Financial Strategy and Capital Flexibility
According to a Citigroup analysis, raising capital in Hong Kong allows BYD to accelerate its international business expansion. While the company has strong cash flow in China, restrictions on transferring renminbi into foreign currencies and the need for regulatory approvals pose challenges for overseas investments.
Conclusion
BYD’s record-breaking share sale highlights its ambitions for global expansion and increased market dominance. However, regulatory challenges and market competition will play key roles in shaping the company’s future trajectory.
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