Reported by journalist Zuo Maoxuan and intern Jiao Wenjuan from 21st Century Business Herald
In 37 months, Jike has broken the record for the fastest new energy vehicle brand from release to IPO.
On May 10th Eastern Time, Jike successfully went public on the New York Stock Exchange and was officially listed for trading under the stock code "ZK". Jike has issued a total of 21 million American depositary shares at a price of $21 per share, raising approximately $441 million. On the first trading day, Jike's stock price rose 33.62% to close at $28.06 per share, with a market value of $6.85 billion.
After a period of silence, the IPO of a new car manufacturing company has finally been ignited again by extreme pressure.
Established for over three years, Jike has become the fastest new car manufacturer to go public and the first successful "second generation" car company to go public.
An investment bank insider told 21st Century Business Herald that there are three main reasons why Geely was able to successfully go public: firstly, due to the recognition of the company's quality by investors, Geely's rich experience in car manufacturing and management has made Geely's prospects more promising; Secondly, the purpose of promoting IPO by Jike is based on the strategic decision of the company's long-term development; In addition, concessions in valuation have also increased the attractiveness to investors.
In fact, it is not easy for Jike to complete its IPO at this time, and the story it tells to the capital market is different from the previous "Weixiaoli".
"The story of Extreme Krypton is quite unique." The above-mentioned investment banker told 21st Century Business Herald reporters that although investors have been enthusiastic about investing in the electric vehicle industry in recent years, in the context of "price war" and severe homogenization competition, Extreme Krypton's rich experience in car manufacturing can give it greater risk resistance ability.
"Unlike traditional car companies and new forces, Jike empowers Geely Holding Group's car making heritage and global resources with a brand new independent brand. This is Jike's third track for global new energy transformation, and Jike's long-term value highlighted in the global capital market." Jike CEO An Conghui said.
The Road to IPO
From its establishment to listing, Jike only took about three years.
You should know that Tesla has been on this road for 7 years, while NIO, Ideal, and Xiaopeng, who are also predecessors of Chinese concept stocks, took 4, 5, and 6 years respectively.
In fact, Li Shufu, Chairman of Geely Holding Group, had already laid the groundwork for the IPO of Jike even before planning to establish Jike.
In February 2021, Geely announced the implementation of two blue Geely action plans. Li Shufu proposed to focus on pure electric intelligent vehicles, establish a new pure electric vehicle company, and actively participate in the competition in the intelligent pure electric vehicle market.
In March of the same year, Jike Intelligent Technology Co., Ltd. was officially established, with Li Shufu personally serving as the chairman and An Conghui as the CEO of Jike.
Relying on Geely's technological strength and the popularity of the new energy market, Jike has attracted industrial capital from different industries. As Jike, responsible for leading Geely's electrification transformation, Li Shufu has high expectations for Jike's IPO. In a sense, from its inception, Jike has been an important brand of Geely, participating in the competition of the era of intelligent and electric vehicles.
In August 2021, Jike obtained a pre A round of financing of $500 million, introducing strategic shareholders such as Intel, CATL, Hongshang Group, Boyu Investment, and Bilibili, with a valuation of approximately $9 billion at that time.
At the end of 2022, Jike is already preparing for an IPO in the United States.
According to public information, on December 7, 2022, Jike Automobile submitted a draft registration statement to the US SEC on a confidential basis for possible initial public offering, with plans to raise over $1 billion. However, from the results, this secretive submission has once again put the IPO process of Jike on hold.
On February 13th of the following year, Jike completed a Series A financing of 750 million US dollars. According to Jike, after the completion of this round of financing, Jike's valuation is approximately 13 billion US dollars.
After passing the listing filing with the China Securities Regulatory Commission, Jike once again challenged its IPO. On November 9, 2023, Jike submitted a preliminary prospectus to the US SEC, which showed that Jike plans to issue no more than 926 million shares of common stock. Industry insiders say that perhaps due to weak market sentiment at the time, the path of Jike IPO had to press the "pause button" again.
On the eve of the bell ringing, on May 3, 2024 local time, Jike submitted an updated Red Herring prospectus to the SEC, with an estimated valuation of $5.13 billion, only 41.8% of the Series A valuation.
The listing of Jike seems to have missed the "good time". Prior to this, Xiaopeng Motors had a pre IPO valuation of approximately $8.613 billion and a post IPO valuation of $11.42 billion. Red Herring also gave Ideal a mid-term valuation of approximately $8 billion, but raised its valuation to $11.5 billion on the day of its IPO.
Unlike the enthusiasm of the capital market for car manufacturing in the past two years, to some extent, the decline in the valuation of Jike is a manifestation of the market's return to rational judgment on the prospects of car manufacturing.
Despite this, multiple investors are still concerned about the listing of Extreme Krypton, and investors and shareholders such as CATL and Mobileye have also expressed interest in participating in the subscription.
The confidence of extreme Krypton
As the first "second generation" to go public in the United States, Jike's own sales and performance are the key to success.
Sales data shows that from January to April this year, Jike delivered a total of 49148 new cars, a year-on-year increase of over 110%. In 2023, a total of 118685 Geely Krypton vehicles were delivered, a year-on-year increase of 65%.
Within less than three years of its establishment, Geely Krypton has launched four models: Geely Krypton 001, Geely Krypton 009, Geely Krypton X, and Geely Krypton 007, all achieving good results in segmented markets. According to official data released by JiKr, the cumulative sales of JiKr 001 exceeded 160000 units within less than three years of delivery.
The growth in vehicle sales has led to an increase in performance. According to the red herring prospectus submitted by Jike, the total operating revenue of Jike in 2021, 2022, and 2023 was 6.5 billion yuan, 31.9 billion yuan, and 51.7 billion yuan, respectively, with a year-on-year increase of 62% in revenue in 2023. However, from 2021 to 2023, Jike's net losses were 4.514 billion yuan, 7.655 billion yuan, and 8.264 billion yuan.
Relying on the scale effect of the group, the gross profit margin of Jike's vehicles has been steadily increasing. From the perspective of gross profit margin, the overall gross profit margin of Geely Krypton in 2023 is 15%, second only to Tesla's 18.2% and Ideal's 21.5% during the same period, and higher than NIO's 9.5% and Xiaopeng's -1.6% during the same period. In terms of gross profit margin growth, according to the previous prospectus, the gross profit margin of Jike was 1.8% in 2021 and 4.7% in 2022, maintaining a continuous growth momentum.
According to the prospectus, from 2021 to the end of 2023, Jike has invested nearly 17 billion yuan in research and development. Among them, the R&D investment in Extreme Krypton in 2021, 2022, and 2023 was 3.16 billion yuan, 5.446 billion yuan, and 8.369 billion yuan, respectively, with a continuous increase in R&D investment.
Backed by the big mountain of Geely, Jike's path to listing has also added a long established technological foundation.
"The Geely Krypton products we see today are not simply created by the Geely Krypton team over three years ago, but are built on Geely's long-term accumulation and investment in the automotive industry over 30 years, relying on system strength to achieve today." Geely Krypton CEO An Conghui previously stated at the Geely Krypton 009 Glory Launch Conference.
Jike, born in the second generation, has directly inherited Geely's years of accumulation in car manufacturing technology, vehicle platforms, and three electric fields. Based on the accumulation of Geely Group in the three electric technology and battery industry, in December 2023, Geely Krypton released a fully self-developed gold brick battery from battery cells to battery packs, attempting to create a new technological moat for Geely Krypton's future development.
An Conghui said, "The progress of technology and the mastery of core technologies in enterprises are very important in terms of cost. Technology must be leading, while costs must be low, in order to form core competitiveness."
Strive to turn losses into profits this year
The ringing of the New York Stock Exchange bell by Jike aims to broaden financing channels, achieve self growth, and achieve the goal of turning losses into profits, in order to achieve healthy operation of the enterprise.
According to the prospectus, the funds raised by Jike will be used in three aspects: about 45% will be used to develop more advanced pure electric vehicle technology and expand product portfolio; About 45% is used for sales and marketing, as well as expanding the company's service and charging network; Approximately 10% is used for general corporate purposes, including operational capital requirements.
"Under the premise of increased sales and gross profit, Geely will strive to achieve its goal of turning losses into profits in 2024 (in accordance with Hong Kong financial reporting standards)," said Dai Yong, Deputy CFO of Geely Automobile Group. According to the plan, the Geely Krypton will achieve its sales target of 230000 units this year, add three new models to enter more segmented markets, and expand overseas markets.
After going public, Jike officially became the ninth listed company in the Geely series, and its importance to Geely is self-evident.
Previously, Geely's capital market had already included eight listed companies, including Geely Automobile, Qianjiang Motorcycle, Han Ma Technology, Lifan Group, Lotus, Jixing Automobile, Yikatong Technology, and Volvo Cars. In addition, Cao Cao Chuxing is also on the way to IPO and is highly likely to become the tenth listed company under "Big Geely".
Unlike the joint ownership of Geely and Volvo, Geely has also become the first high-end electric vehicle enterprise independently incubated and listed by Geely, shouldering the task of leading Geely to complete its high-end layout.
"The Extreme Krypton IPO is a microcosm of Geely Holdings' overall strategic planning. Through the IPO, we increase the transparency and standardization of corporate governance, enhance the independence and completeness of subsidiary business group operations and accounting, improve operational efficiency, and communicate better with users, industries, regulatory agencies, and investment institutions with a responsible attitude, promoting global compliance governance of the enterprise." said Li Donghui, CEO of Geely Holdings Group.
This listing in the United States is also seen by industry insiders as a signal for Geely to accelerate its overseas expansion. In June 2023, Jike officially announced its entry into the European market. In December 2023, the first European version of the Extreme Krypton 001 was successfully delivered in the Netherlands. The ringing of the bell on the New York Stock Exchange will also expand the overseas presence of the Geely and Geely brands.
According to the financial report data disclosed by Geely, in 2023, some of Geely's overseas business began to make money due to the benefits of technology going global. According to the financial report, in 2023, Geely and Renault's joint venture Renault Korea had a net profit of 500 million yuan, with Geely receiving investment income of 169 million yuan and dividend income of 180 million yuan; From May to December 2023, the net profit of Proton Automobile was 290 million yuan, and Geely Automobile confirmed an investment income of 116 million yuan based on the proportion of shares.
It is worth noting that as an important way for traditional car companies to transform in the era of electrification, the listing of Geely's spin off Jike has set a good example for its peers to accelerate their layout in the capital market. In March of this year, at the media communication meeting of the 2024 Electric Vehicle Hundred People Conference, Gu Huinan, General Manager of GAC Aion, stated that the IPO process of GAC Aion is also waiting for the market to recover.
However, in the context of the return of rationality in the capital market, how to tell the stories of the second generation can no longer be a gimmick for financing in the capital market. Industry insiders believe that actual products and technologies are more attractive to industrial capital.
It should be pointed out that the competition in the current new energy vehicle industry continues to intensify, and the "price war" is becoming increasingly fierce. Under the annual goal of turning losses into profits, efforts should be made to improve the profitability of Jike, and crossing the red line of losses is still a key factor for Jike to withstand market tests.