Buffett-Backed BYD Sells $3.9 Billion of Shares as EV Stocks Electrify

01/21/2021 | 02:47am
Warren Buffett

By Joanne Chiu

BYD Co., a Chinese car maker backed by Warren Buffett, raised $3.9 billion from a stock sale, joining peers in capitalizing on investors' bullishness about new-energy vehicles.

The deal marks BYD's biggest equity financing since it listed in Hong Kong in 2002. The company, whose stock also trades in Shenzhen, makes electric cars, batteries, plug-in hybrids and fossil-fuel-powered vehicles.

Investor enthusiasm about green cars and breakthroughs in battery technology have sent the company's stock soaring, making it more attractive for BYD to raise new funds. BYD stock in Hong Kong has more than quintupled in a year, giving it a market capitalization of $91 billion. That is roughly in line with NIO Inc., a newer Chinese rival, and compares to an $806 billion market cap for Tesla Inc., according to FactSet.

Other electric-car makers have also tapped equity markets for funds as they race to secure a bigger slice of the growing sector. Chinese competitor Xpeng Inc. in December raised $2.5 billion from a follow-on offering of American depositary receipts, while NIO has raised more than $4.5 billion in December and January by selling ADRs and convertible bonds.

A unit of Warren Buffett's Berkshire Hathaway Inc. has held a stake in BYD since 2008. As of June 2020, Berkshire held 8.25% of BYD, or nearly 25% of its Hong Kong-listed stock, according to BYD's half-year report.

Orders for new BYD shares outstripped supply several times over, with Chinese funds, traditional institutional investors and hedge-fund managers all participating, according to an update provided to investors, which was seen by The Wall Street Journal.

Investors have bid up Chinese car stocks in search of the next Tesla. They are also betting that improved battery technology and infrastructure, plus a pledge by China to become carbon-neutral by 2060, will help fuel wider adoption of electric vehicles.

China is already the world's largest market for electric vehicles, and has become a major battleground for EV manufacturers. This month, Tesla delivered its first made-in-China Model Y compact crossover vehicles.

BYD sold 133 million new shares at 225.0 Hong Kong dollars, the equivalent of $29.03, representing a 7.8% discount to the stock's last closing price. The deal, first disclosed in December, ended up being larger than initial plans to raise a maximum of $3.6 billion. Units of UBS, Goldman Sachs and CICC were the most senior banks on the deal.

BYD's stock traded nearly 4% higher at HK$252.20 by early afternoon Thursday in Hong Kong.

Write to Joanne Chiu at joanne.chiu@wsj.com

(END) Dow Jones Newswires

01-21-21 0246ET

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